Here’s How to Make Money in Volatile Markets… Just Like the Pros!
“Anyone can make money when stocks are moving higher. That’s not what our clients hire us for!”
I distinctly remember my boss Bill telling me this one morning when the market was set to open lower.
I was having a good year at that point and Bill wanted to make sure it stayed that way.
He went on to say, “Our clients trust us with their money because we protect their wealth when stocks pull back. And we find opportunities to make money even when most people are taking losses. So if you want to succeed in this business, you better not panic. You better find ways to keep those profits growing and protect the wealth that our clients worked so hard to make.”
In today’s volatile market environment, Bill’s words are just as relevant. That’s why today I’m urging you to follow the same advice that Bill gave to me many years ago.
Just like Bill recommended I do with client money years ago at the hedge fund, today I’m recommending that you also look to buy the market’s strongest stocks that are currently trading at a discount.
That’s because the pros on Wall Street aren’t concerned with the market pullback and the fluctuations we’ve seen over the last two weeks. In fact, these investors actually love seeing more fluctuations like this for two reasons.
- When stocks swing back and forth, it gives active investors an opportunity to buy more of their favorite stocks at a discount, and then lighten up on positions when stocks move back higher.
And remember, these guys don’t necessarily close out their entire positions when markets are high and buy their full positions when stocks pull back. But they do like to trim positions, like maybe sell a quarter, a third, or even half of their shares during the good times.
- Money managers love competition. Bill and I were living proof of this. In fact, some would argue I’m a bit too competitive at times after growing up with 6 brothers in a house where everything was a competition…
Anyway, these professional investors are competitive people. And when the market just trades steadily higher, most of them perform about the same. But when the market fluctuates, it gives them a chance to compete to see who is better at handling the swings and making more money.
It’s not just about pride. For the best money managers, it’s about beating their competition so wealthy investors give them more money to manage. That’s how you grow your business in this industry — by taking advantage of the market swings, protecting your clients’ wealth, and making more money than the next guy so more customers will come your way.
I bring this up because today’s market environment is serving up another opportunity for money managers to prove their worth to clients.
As the volatile stock market environment continues — and some of our favorite stocks start trading at discount prices — I expect many money managers will take this opportunity to buy large stakes in the strongest companies.
And we have the opportunity to invest alongside them!
Some of my favorite areas of the market right now that I believe benefit most from this opportunity include:
Real Estate Investment Trusts (REITs) — As the name implies, REITs invest in real estate opportunities, and generates profit when those investments pay off. And while low interest rates have played havoc on individuals with savings accounts and certificates of deposit, those same rates actually help REITs.
That’s because low interest rates make it cheaper for REITs to borrow money to fund property purchases. And lower rates also help to drive up the value of real estate because there is more demand from investors who can better afford mortgages.
In short, if you’ve been waiting on the sidelines for just the right moment to invest in these real estate plays, now is the time!
Business Development Companies (BDCs) — A Business Development Company (or BDC) is an investment company that helps small businesses get the money needed to grow. The money can be used to pay for new equipment, buy inventory, hire staff, and plenty of other business expenses.
As part of this arrangement, BDCs are also required to pay at least 90% of profits to shareholders. So if you invest in a BDC, the government actually requires that you get paid.
NOTE: REITs are also required to pay out at least 90% of profits.
Electronic Gaming Companies — This is a new area of the market that we’re focusing on here at The Daily Edge because its prospects are undeniable.
There are a number of different gaming companies that should benefit from the long-term rise in video game popularity. And it’s important to remember that there actually could be several winners as the video game market is big enough to support several blockbuster hits at once.
Right now, many of the industry’s strongest stocks are being hit hard by headlines relating to the U.S.-China trade war, which allows long-term buyers an opportunity to get in today at an even steeper discount.
Bottom line: I understand that buying stocks when the market is flashing red is easier said than done.
However, this is exactly how the pros on Wall Street handle situations like this. And if you act quickly, you too could ride their upcoming buying streak higher!
Here’s to growing and protecting your wealth!