What’s the forecast for stocks? Asking questions frames the issue.
What is the subject? – Stocks.
Why own them? – Stocks are more than letters and numbers on a daily scoreboard. A stock represents ownership in a business. Owners are entitled to a portion of the profits over the life of that business. In addition, companies can adapt to changing circumstances. Over the long run, stocks have historically done a better job of growing and protecting purchasing power than bonds or cash.
When should one own them? – Generally, when the market price is near or below intrinsic value, which creates a margin of safety. Intrinsic value is the net present value of the future cash flows from a business.
How much to own? – The answer is based on valuations and outlook. Asset allocation determines how much to have in stocks, bonds, cash, or other asset classes. When an asset is cheap, have more. When it is expensive, have less.
Where are we today? – With COVID-19 and related economic concerns, this is the key question.
Positives:
Negatives:
Summary:
What’s the forecast? There will be volatility. What matters for investors is asset class selection and diversification, aligned with the investor’s age, goals, and risk profile. Call me with your questions.
Happy May, and a “BIG HUG” for all the moms on the 10th.
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Copyright © 2020 - Any opinions are those of James Aldendifer and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The above situation is a hypothetical example for illustration purpose only and does not represent an actual investment. Expressions of opinion as of this date are subject to change without notice. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.
