What Are Examples of Counterintuitive Investment Moves that Paid Off?
In the often counterintuitive world of investment, we've gathered insights from seasoned professionals like a Wealth Advisor, who has seen success with the bold strategy of buying equities during market declines. Alongside expert advice, we also present additional answers that reflect unconventional wisdom, such as profiting from market drops with inverse ETFs. Here's a collection of surprising investment moves that have led to significant gains for clients.
- Buy Equities During Market Declines
- Pivot to Overlooked Utility Stocks
- Speculate on Market Timing
- Invest in 'Boring' Industry Stability
- Capitalize on Debt-Laden Company Turnarounds
- Purchase Shares Amid Financial Panics
- Profit from Market Drops with Inverse ETFs
Buy Equities During Market Declines
We like to buy publicly-traded equities when they are on sale. For our clients with a high risk tolerance and a long-term horizon, we encourage them to buy more equities during steep market declines. There are often moments in history when the markets trade at ridiculously attractive levels because of events such as the global financial crisis, the post-tech bubble, and the Pandemic.
These are times when the natural instinct for some is to sell equities; however, we encourage our clients to buy equities with funds designated for long-term needs. The reason we do this is that we know if clients can buy equities at lower valuations, the odds are their long-term returns will be attractive.
Pivot to Overlooked Utility Stocks
Once, I recommended a counterintuitive investment move to a client that turned out quite well. It was during a period when tech stocks were everyone's favorite, and most portfolios were heavily weighted in that sector. Seeing an overvaluation in tech, I suggested we pivot to utilities—a sector often overlooked due to its slow growth. My client was skeptical, given the hype around tech's rapid gains. I explained that utilities are stable, offer consistent dividends, and perform well during market volatility.
Reluctantly, the client agreed to reallocate a portion of their investment. Just a few months later, the tech bubble experienced a significant correction. As a result, the utility stocks not only held their value but also provided steady dividends. This move protected the client’s portfolio from larger losses and highlighted the importance of diversification. In the end, the client was pleased with the decision, appreciating the foresight in an unconventional strategy.
Speculate on Market Timing
Many investors have found success by diving into speculative bubbles, even when prices appear to be at their peak. This strategy revolves around the belief that there will always be someone willing to buy at an even higher price. Such an approach carries significant risk but has been fruitful in the past when timed properly with the market's highs and lows, often defying the traditional wisdom of buying low and selling high.
However, it requires a good understanding of market trends and participant behavior. Act cautiously and consider this strategy if you're keen to play the high-stakes game of market timing.
Invest in 'Boring' Industry Stability
Some investors have chosen to place their bets on industries often considered dull or uninteresting. These sectors, such as utilities or consumer staples, may not seem like the hotbeds of growth, but they can offer stability and surprising returns. Companies in these 'boring' industries may benefit from consistent demand and robust business models, making them unexpected growth contenders in a volatile market.
Investors who explore these avenues often find that these stable sectors can indeed become pillars of a strong portfolio. Look into such steady sectors for potential investment opportunities that might yield growth beyond expectations.
Capitalize on Debt-Laden Company Turnarounds
Investing in companies with considerable debt can be a counterintuitive move that sometimes leads to high rewards. The general premise is to invest in a company at a low point when it’s saddled with debt but has a strong potential for a successful turnaround. This requires a keen eye for businesses with solid fundamentals that are capable of restructuring their operations and financial strategies.
These investments can be risky, but they often come at a bargain price, setting the stage for dramatic recoveries. Seek out businesses with turnaround potential and consider the possibility of a rebound that could bring significant gains.
Purchase Shares Amid Financial Panics
In times of market terror, when most investors are rushing to sell, some contrarians choose to buy. During widespread financial panics, share prices often plummet below their intrinsic value due to widespread fear, offering a unique buying opportunity for those with a cool head. These moments, though fraught with risk, can be an ideal time to build positions in fundamentally strong companies at depressed prices.
History has shown that markets rebound over time, and those who invest during these dips can reap considerable rewards. Keep an eye out for these market dips to possibly capitalize on the fear that drives others away.
Profit from Market Drops with Inverse ETFs
A less conventional strategy is to bet against the market by using inverse Exchange Traded Funds (ETFs). Inverse ETFs climb in value as the market declines, offering a hedge against downturns or a speculative opportunity to profit from falling markets. Far from the usual investment target, these funds provide a tool for investors who see trouble ahead in the economy or who wish to temper the risk of loss in their portfolios during bear phases.
They demand a certain vigilance and a readiness to act swiftly when markets change direction. If you're anticipating a market drop, consider exploring inverse ETFs as a way to turn market declines into investment gains.