How confident are you that we won’t see another 30% drawdown in stocks? A la February and March?
The S&P 500 Index just hit a new all-time high, but the U.S. economy is struggling.
If this has crossed your mind, there’s something you need to know about.
You may already know of this but simply hadn’t thought much about it.
And I can’t blame you. Many learn the opposite of what I’m about to tell you.
But I urge you to consider it because there’s nothing to lose … even if you’re a buy-and-hold investor.
And it’s another way to take control of your financial future.
There’s Nothing to Lose
What if you took a portion of your investments — say, 5% — and invested differently? We’ll call it your short-term money.
The pandemic we’ve been going through is an example of a time when this would work.
For example, in February and March, you saw the first effects of the virus. The news was full of reports that we need more testing.
When you read those headlines, what if you said to yourself: What kind of company would benefit from more testing?
The answer: One that does it already, right?
So, say you took some of your short-term money and bought Quest Diagnostics Inc. (NYSE: DGX).
It conducts lab tests. And you know it’s one of the leading testing firms in the U.S. You see its offices in most cities you visit.
It’s a simple idea … and it worked.
This is what shares have done year to date:
DGX Has Soared Since April
Shares are up more than 50% from their March low. And that’s after they fell to a lower low in April!
That’s solid.
Now, imagine if you had bought the May $90 call options and sold a week before they expired.
You would have made 620%!
Shares rose from about $75 to $112 over that stretch. That was a solid move: 49%.
But the options rose more than 10 times that much.
When you have those kinds of returns, you don’t have to invest much money in an idea.
And, honestly, you don’t want to. Options are more volatile than stocks.
But they can be super lucrative.
A System for Calling Balls and Strikes
At the start of this article, I asked if you worry about the market seeing another fall.
Many of us do.
One way to address this risk is to invest a portion of your money using the advice of my colleague Mike Carr. As you’ve seen with Quest, you don’t have to invest a lot to get a lot.
Mike’s new “Strike Zone” indicator can alert you if something is happening in the market that could lead to a fall.
And don’t worry, his system has bullish picks, too.
Like the Quest example, the Strike Zone is a simple idea. But the analysis that underlies Mike’s system is not simple. He’s a smart guy, and his system reflects that.
We don’t have to worry about all the bells and whistles, though. We simply know it predicts a logical occurrence.
And you can use his knowledge to turn one simple trade into big gains.
But you don’t have to take my word for it. Just watch Mike’s new presentation.
Remember, it’s your money. No one cares about it more than you do. You shouldn’t take more of a risk with it than what makes sense for you.
And this system may not be for you. If so, that’s OK.
But you owe it to yourself to at least learn more.
You’ve seen that earning 620% on a common household name isn’t a pipe dream. And it will help you reach your goals.
Good investing,
Editor, Profit Line