Written by: Lindsey Boycott
If there’s anyone who knows the benefits of buying on a market downturn, it’s distressed debt billionaire Marc Lasry. He built a fortune finding troubled assets and now co-leads a hedge fund, Avenue Capital, with $11 billion in assets under management.
The basic message he wants to pass on is if investors can afford to buy and hold, then putting money into stocks while the market thrashes around amidst coronavirus fears.
When it comes to buying opportunities, few can rival the 30 percent drop in the Dow Jones this March. This bear market is beaten out only by the September 1931 market slide seen during the Great Depression. It's an uncertain time for many people, however, and it's challenging to think of what's happening as anything more than an anxiety-inducing experience they must survive.
Lasry sees it differently, "Every time there's a down move, you should be buying." There is the question of timing, which can trip up even the most tough-minded of investors. Many will wait to see if prices come down even further while others hold because they want to see if things recover before committing capital. There is no way to predict the perfect time to buy outside of those factors directly influencing an investor's financial situation.
“You’re never going to be able to time this thing. If you know that you don’t have to sell next week, then I would absolutely be a buyer. Should you start coming into today?” Lasry asks. “Absolutely.”
Based on what is known, the stock market experienced a significant drop across multiple indexes based on COVID-19 concerns. For example, China is a clear example of how the coronavirus will run its course, and now that the country is recovering, it's a good indication that other states will also overcome, and the market downturn is only temporary. Investors can take advantage of and buy stocks that will likely surge back up when things return to some semblance of normalcy.
Another good strategy is setting some money aside in case there is another buying opportunity. Nobody can forecast how the markets will fluctuate as COVID-19 takes its toll in the coming days and there may be other chances to buy up stocks at an even steeper discount. The government has cut introduced a stimulus package meant to ease economy anxieties and encourage spending.
The best course of action for investors might be to stagger their investments over the coming weeks. Like Lasry observed, it's impossible to know when the perfect opportunity will present itself. Ideally, investors should have funds on hand to strike while the stock-iron is hot. Another consideration is the kind of stock that might serve investors best will change with factors like age, interest, risk tolerance and horizon. People should conduct their own research and consult a planner for more information on what’s right for them.
Related: Bitcoin Crash Raises Questions About Need for Circuit Breaker
Sources:
https://www.marketwatch.com/investing/index/spx
https://www.avenuecapital.com/team.aspx?c=Founders
DISCLOSURE:The views and opinions expressed in this article are those of the contributor, and do not represent the views of Advisorpedia. Readers should not consider statements made by the contributor as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click here.