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3 Ways I've Adjusted My Investment Strategy During the COVID-19 Crisis – The Motley Fool

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3 Ways I've Adjusted My Investment Strategy During the COVID-19 Crisis – The Motley Fool


The COVID-19-induced stock market crash isn’t the first decline I’ve experienced as an investor, but it’s been a challenging one to grapple with. During past downturns, I’ve only had to worry about my portfolio’s health — not my physical health. But now, there’s so much uncertainty just not regarding the stock market’s recovery, but our country’s physical, economical, and mental recovery on a whole.

All of this has prompted me to invest a little bit differently this time around. Here are a few tweaks I’m implementing.

1. I’m diverting less spare cash to my brokerage account

Right now is a prime opportunity to load up on quality stocks at a discount, and during a normal market crash, I’d be funneling pretty much every extra dollar that comes my way into my brokerage account. But this situation is different, and because we have no way of knowing what life will look like two, three, five, or 12 months from now, I’m being a little more cautious — namely, by padding my emergency fund (even though it’s already at a healthy level) and then putting what’s left over into my brokerage account. I want that extra cushion in the bank in case a full-blown recession hits, and while I’m losing out on some opportunities by padding my savings, I’m also gaining peace of mind.

IMAGE SOURCE: GETTY IMAGES.

2. I’m focusing on individual stocks over index funds

Index funds can be a solid buy during a stock market downturn because their movement mimics the broader market. If you buy, say, an S&P 500 index fund when that index is down, once it picks back up, you stand to gain — all without having to do a ton of legwork. I happen to be a big fan of index funds and told myself I’d buy more if the market went down, but instead, I took the opportunity to buy a few tech stocks that I’d been eying for months (or years) that were finally affordable enough to snatch up, as well as some relatively cheap travel stocks. The reason? I’d already done my research on these companies and felt they were a good buy before the market tanked, so I wanted to snag them at a lower share price while I could.

3. I’m front-loading my retirement plan contributions

Because I own an S-Corp and pay myself a salary, I have the option to fund my Solo 401(k) a couple of ways — I can contribute a maximum of $19,500 from my salary, which is the 401(k) limit this year for anyone under 50, and I can then contribute a portion of my business’s net income, up to a maximum of another $37,500 on top of my $19,500. Because I don’t know how much income my business will generate, I can’t yet calculate what my total allowable Solo 401(k) contribution will be for the year. But since I know I’m eligible to put in up to $19,500 from my salary, I went ahead and front-loaded that contribution so it’s all in my account. Normally, I’d divvy that $19,500 up across 12 months of contributions, but since now’s a good time to buy long-term investments at a discount, I wanted that money in my 401(k) right away.

Though stock market crashes are fairly common, this particular one occurred so rapidly it threw investors for a loop. And the fact that it was spurred by a major health crisis has made it all the more difficult to process. As such, I’ve made a few changes that I feel will benefit me, and I’d encourage any investor, even seasoned ones, to see if it makes sense to do the same.

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More China coal investments overseas cancelled than commissioned since 2017

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EU, U.S. agree to talk on carbon border tariff

More China-invested overseas coal-fired power capacity was cancelled than commissioned since 2017, research showed on Wednesday, highlighting the obstacles facing the industry as countries work to reduce carbon emissions.

The Centre for Research on Energy and Clean Air (CREA) said that the amount of capacity shelved or cancelled since 2017 was 4.5 times higher than the amount that went into construction over the period.

Coal-fired power is one of the biggest sources of climate-warming carbon dioxide emissions, and the wave of cancellations also reflects rising concerns about the sector’s long-term economic competitiveness.

Since 2016, the top 10 banks involved in global coal financing were all Chinese, and around 12% of all coal plants operating outside of China can be linked to Chinese banks, utilities, equipment manufacturers and construction firms, CREA said.

But although 80 gigawatts of China-backed capacity is still in the pipeline, many of the projects could face further setbacks as public opposition rises and financing becomes more difficult, it added.

China is currently drawing up policies that it says will allow it to bring greenhouse gas emissions to a peak by 2030 and to become carbon-neutral by 2060.

But it was responsible for more than half the world’s coal-fired power generation last year, and it will not start to cut coal consumption until 2026, President Xi Jinping said in April.

Environmental groups have called on China to stop financing coal-fired power entirely and to use the funds to invest in cleaner forms of energy, and there are already signs that it is cutting back on coal investments both at home and abroad.

Following rule changes implemented by the central bank earlier this year, “clean coal” is no longer eligible for green financing.

Industrial and Commercial Bank of China, the world’s biggest bank by assets and a major source of global coal financing, is also drawing up a “road map” to pull out of the sector, its chief economist Zhou Yueqiu said at the end of May.

 

(Reporting by David Stanway; Editing by Kenneth Maxwell)

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Bank of Montreal CEO sees growth in U.S. share of earnings

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Bank of Montreal earnings beat estimates, adds mortgage safeguards

Bank of Montreal expects its earnings contribution from the U.S. to keep growing, even without any mergers and acquisitions, driven by a much smaller market share than at home and nearly C$1 trillion ($823.38 billion) of assets, Chief Executive Officer Darryl White said on Monday.

“We do think we have plenty of scale,” and the ability to compete with both banks of similar as well as smaller size, White said at a Morgan Stanley conference, adding that the bank’s U.S. market share is between 1% and 5% based on the business line, versus 10% to 35% in Canada. “And we do it off the scale of our global balance sheet of C$950 billion.”

($1 = 1.2145 Canadian dollars)

 

(Reporting by Nichola Saminather; Editing by Leslie Adler)

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GameStop falls 27% on potential share sale

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3 Ways I've Adjusted My Investment Strategy During the COVID-19 Crisis – The Motley Fool

Shares of GameStop Corp lost more than a quarter of their value on Thursday and other so-called meme stocks also declined in a sell-off that hit a broad range of names favored by retail investors.

The video game retailer’s shares closed down 27.16% at $220.39, their biggest one-day percentage loss in 11 weeks. The drop came a day after GameStop said in a quarterly report that it may sell up to 5 million new shares, sparking concerns of potential dilution for existing shareholders.

“The threat of dilution from the five million-share sale is the dagger in the hearts of GameStop shareholders,” said Jake Dollarhide, chief executive officer of Longbow Asset Management. “The meme trade is not working today, so logic for at least one day has returned.”

Soaring rallies in the shares of GameStop and AMC Entertainment Holdings over the past month have helped reinvigorate the meme stock frenzy that began earlier this year and fueled big moves in a fresh crop of names popular with investors on forums such as Reddit’s WallStreetBets.

Many of those names traded lower on Thursday, with shares of Clover Health Investments Corp down 15.2%, burger chain Wendy’s falling 3.1% and prison operator Geo Group Inc, one of the more recently minted meme stocks, down nearly 20% after surging more than 38% on Wednesday. AMC shares were off more than 13%.

Worries that other companies could leverage recent stock price gains by announcing share sales may be rippling out to the broader meme stock universe, said Jack Ablin, chief investment officer at Cresset Capital.

AMC last week took advantage of a 400% surge in its share price since mid-May to announce a pair of stock offerings.

“It appears that other companies, like GameStop, are hoping to follow AMC’s lead by issuing shares and otherwise profit from the meme stocks run-up,” Ablin said. “Investors are taking a dim view of that strategy.”

Wedbush Securities on Thursday raised its price target on GameStop to $50, from $39. GameStop will likely sell all 5 million new shares but that amount only represents a “modest” dilution of 7%, Wedbush analysts wrote.

GameStop on Wednesday reported stronger-than-expected earnings, and named the former head of Amazon.com Inc’s Australian business as its chief executive officer.

GameStop’s shares rallied more than 1,600% in January when a surge of buying forced bearish investors to unwind their bets in a phenomenon known as a short squeeze.

The company on Wednesday said the U.S. Securities and Exchange Commission had requested documents and information related to an investigation into that trading.

In the past two weeks, the so-called “meme stocks” have received $1.27 billion of retail inflows, Vanda Research said on Wednesday, matching their January peak.

 

(Reporting by Aaron Saldanha and Sagarika Jaisinghani in Bengaluru and Sinead Carew in New York; Additional reporting by Ira Iosebashvili; Editing by Sriraj Kalluvila, Shounak Dasgupta, Jonathan Oatis and Nick Zieminski)

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