By: Dividend Sensei
In part one of this series, we covered two very easy ways to avoid costly mistakes with your retirement portfolio.
Now let’s look at the best way to directly profit from the COVID surge.
Take Advantage Of Short-Term Market Insanity
This is why I ignore 12-month price targets from analysts.
|Time Frame (Years)||Total Returns Explained By Fundamentals/Valuations|
|11+||90% to 91%|
(Sources: DK S&P 500 Valuation And Total Return Potential Tool, JPMorgan, Bank of America, Princeton, RIA)
It’s also why I avoid market timing and speculating about what stocks will do in any given week, month, or even year.
In the short-term sentiment, momentum, and just plain dumb luck drives almost all stock returns.
But in the long-term, fundamentals are 11X as powerful as luck. That’s the key to getting and staying rich on Wall Street.
Even during this ultra-low volatility year, we’ve seen tech corrections, and corrections in small-caps (Russell 2000).
We’ve seen re-opening stocks like cruise liners and airlines crash when delta cases surged.
Now many of these reopening stocks have seen significant and long-lasting fundamental deterioration due to higher debt, and the fact that it may take several years for demand to fully recover from the pandemic.
But consider this. Industrials are both cyclical, and thus tied to the health of the economy, and some of the best companies to own should we pass a $4 trillion infrastructure package.