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Now’s the Time to Invest

Posted July 6, 2022

With valuations creeping lower by the day, it’s only a matter of time before the great market reversal of 2022...

That might be a little ambitious, as the upcoming earnings season will likely bring more pain to companies that haven't been performing well.

But if you’ve been reading us for any length of time, you know we’re contrarians here at Wealth Daily.

When the market zigs, we zag.

And when the mainstream media post their weekly fluff, you know we've likely already covered it in these pages.

Here's what I mean...

Monday morning, stocks were swimming in a sea of red on so-called “recession fears”...

But anyone living in the real world already knows we’ve been in a recession for nearly a year.

As recessions last 11 months on average, the contrarian in me is inclined to think it won’t last much longer.

That doesn’t mean we’re out of this bear market yet, however.

After all, the economy and the stock market are two different things.

That's why you've got to take CNN’s Fear and Greed Index with a grain of salt.

It’s been spitting out an “extreme fear” reading for the last few weeks.

fear and greed

But this is a short-term market indicator and not useful for long-term investors.

Needless to say, there’s a lot of noise out there.

But here’s what you need to know...

Realize that it’s OK when the market reverses.

It’s never ideal, but there are plenty of ways to make money in a bear market.

Investing in This Market

Here’s how I’m playing this volatile bear market...

I'm focusing on the fundamentals.

I like to refer to this as playing “small ball” with your investments.

What do I mean by small ball?

Well, there’s a phenomenon in baseball where even an outclassed team can win if they stick to the fundamentals and execute them properly: fielding ground balls, turning routine double plays, hitting base hits, and advancing runners. Small ball creates a domino effect that can lead to huge game-winning rallies and epic comebacks.

To make sure you’re playing small ball in your investments, first, implement a dollar-cost averaging strategy. That’s when you slowly build up equity in stocks. Don’t just throw all your money into a stock at one time. This gives you a chance to lower your cost basis if the market reverses.

Second, buy good dividend-paying companies that have either paid consistent dividends every year or increased their dividends. And set up a dividend reinvestment plan (DRIP) so your interest compounds over time. Now, you don’t want to fall into a dividend trap, but do your own research on a company, and if you like what you see, go for it!

For example, I invest in Icahn Enterprises (NASDAQ: IEP), which is trading for slightly below $50 right now. There are two things I like about the stock. First, it’s run by Carl Icahn, the infamous activist investor. He’s known for acquiring companies, restructuring them, and then selling the assets for a profit. He owns 80% of the company, which is what we like to see when looking at insider ownership. For reference, insiders own 85% of Coca-Cola. Not to mention this puppy pays a $2-a-share dividend. For me, that’s more than enough to offset a lot of the pain in the market right now. I also like the price action, as it’s stayed in a steady trend line since 2015.

Finally, use the market’s irrationality to your advantage by playing options on the CBOE Volatility Index, otherwise known as the VIX. The VIX tracks the volume of put and call options on the S&P 500 to project 30-day volatility expectations. Basically, when the stock market drops, the VIX goes up. Brokerages use various inverse-leveraged exchange-traded funds (ETFs) to track the VIX. In my brokerage, it's the ProShares VIX Short-Term Futures ETF (VIXY). I’ve been playing around with buying calls on the VIXY by waking up, grabbing my coffee, and checking the futures. If the market's down, I might buy a few call options on the VIXY. A small move in the underlying ETF can produce truly outsized returns. I've bagged nearly 200% using this strategy in just the last two weeks.

That's small ball for you.

An Asset That's Never Been Worth $0

Now, being a contrarian doesn't mean speculating for the sake of it.

We've seen that strategy fail as speculators have tried so hard to make cryptocurrency the next big thing.

But as I've argued, crypto is merely a castle in the sky.

And like all castles held up by a cloud of speculation, it has come crashing back down to Earth.

Ironically, crypto was the ultimate contrarian investment... more than a decade ago.

But, as is the fate of all trends, it’s become so mainstream that it’s just not cool anymore.

El Salvador is feeling the pain, as it pegged its currency to Bitcoin over a year ago.

That bet hasn’t paid off, as the popular crypto has lost roughly 60% of its value.

But one asset that has never been worth zero is, of course, gold.

Buying gold ain't sexy, but that's exactly why a contrarian would start digging around in the metals space.

In fact, one company just made the biggest gold find in 50 years, and no one's talking about it — the perfect investment for a contrarian like yourself.

Get the full story here about why you should start diversifying into gold and gold miners today.

Stay free,

Alexander Boulden
Editor, Wealth Daily

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After Alexander’s passion for economics and investing drew him to one of the largest financial publishers in the world, where he rubbed elbows with former Chicago Board Options Exchange floor traders, Wall Street hedge fund managers, and International Monetary Fund analysts, he decided to take up the pen and guide others through this new age of investing.

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