The Answer to This Week’s Volatility
Investors are getting nervous.
Stocks are rising and falling in big, roiling waves. The companies that took the markets to fresh highs are struggling to stay afloat as the rushing water crests above them.
As they sink, they’re dragging their large cap brethren with them.
As Apple goes… so goes Boeing.
As General Electric goes… so goes Microsoft.
It makes no sense, but they’re all tied together like one multi-armed beast that’s struggling to keep the salty water out of its mouth.
What’s crazy is that, at the same time the market is moving in unison, the great diversifiers have been pushed aside.
In fact, as we wrote recently, many exchanges are flat-out banning them.
Investors should be outraged.
You see, we’ve long argued the modern investment business is designed to lock folks into a life of mediocrity. It’s good for repeat business, and the customers don’t tend to complain all that much.
But they should.
It’s just as we told a reader in our message yesterday. When it comes to investing, you get what you pay for – that risk walks hand in hand with reward.
That reader asked us our advice for his family trust. He didn’t want to risk the cash but wanted it to grow.
We told him to diversify. Own everything from bitcoin to bonds to bullion. The wealth will grow without much volatility.
We admit our answer was rather short and generic. We had to move on to the controversial stuff in the mailbag. We wish we’d have gone deeper into an asset class that too many folks overlook.
We call them the great diversifier… and yet Wall Street wants to ban them.
They’re too risky, they’ll tell you. They’re tools of crime and manipulation, the regulators shout.
The Time Is Now
Done right, penny stocks should play a critical role in every investor’s portfolio.
Whether you’re going as bold and big as we recommend with our barbell strategy or following a more typical diversification model, there’s plenty of room for the market’s smallest and cheapest stocks.
Looking into our penny stock portfolio this morning, for instance, we see some good news.
Since this summer, we’re up 81% on a tiny medical marijuana company that’s focused on treating Alzheimer’s and Parkinson’s disease.
We’re up 41% on a solar company…
Up 40% on a wireless technology firm…
And, proving that penny stocks aren’t all high-tech or high-risk, we’re up more than 50% on a company that makes a living dredging lakes and rivers.
What’s important to know is that most of these big gains came in recent weeks – at the very same time most stocks were moving like synchronized swimmers.
It’s a vital notion for your portfolio.
In fact, we’d argue it’s more important now than ever.
As correlations rise, it’s vital that you bust those ties with some well-placed diversity.
We’ll spend the rest of the week looking at exactly how to do it.
Small stocks don’t have to mean big risk.