The US market is facing volatility currently, and I saw a drop in my portfolio, what should I do about my investment?

Part 1

Investor: The US market is facing volatility currently, and I saw a drop in my portfolio, what should I do about my investment?

• First, let’s understand your investment prospects.
• If, you plan to hold for more than 10 years and your portfolio includes financially flourishing companies with zero debt, consistent revenue growth, strong profit margins which can sustain difficult times like recession, then yes, you can stay invested.

1. Let’s understand this better:

   When I talk about long-term investments in strong and flourishing companies, it is mandatory, the company fulfils the following criteria:

   • Gross profit margin should exceed 35% and ROIC (Return on Invested Capital) should be higher than 15%.
   • A company with a good Capex is advisable. Capex (Capital Expenditure) refers to the funds a company uses to acquire assets and machinery to run its operations. However, the Capex/Sales should stay below 5-7% or else it may financially deteriorate the company.
   • Capital allocation is crucial. I target a ROCE (Return on capital employed) which is more than 20%.
   • Net profit margin should be more than 10%.
   • A good company exhibits a consistent revenue growth. Ideally, it should be 5% and more.
   • Evaluate the company's ability to handle debt. If the company is debt free, its great, but if not, then ensure the company has sufficient cash flow to cover the interest costs and the debt-equity ratio is also moderate.
2. If your portfolio doesn't meet these criteria then,
   • Sell your investments.
   • Keep cash in hand and invest in low-risk assets for potential opportunities in the next year.
3. Investor: What type of assets to consider? Stocks, Bonds, or Real Estate?
   • The risk of recession is high. It is advisable to avoid the stock market for now. Long term bond yields are already high and may increase further.
   • Also, if you have cash in hand, it is ideal to invest in short terms bonds for now to utilize the cash rather than keeping it idle. The interest rates on short-term bonds are better as compared to previous years.
   • Short-term interest rates and long-term yields may also rise in the future, but for now investing your cash is a viable option.
   • If you are open to risk, invest a partial amount in ETF (Exchange Traded Fund) like QQQ and SPY put Options. I can help you select the right ones.
   • I have been recommending investments in energy-related commodities and stocks like #NaturalGas and #CrudeOil which has seen a 32% increase from last month.
   • If you notice any dips, consider investing, as I expect Crude Oil to reach 110-120 soon.

In part one, we discussed investment prospects and asset options. Part two will cover bond safety and portfolio diversification. 💼📈🌐

Don's miss out on valuable insights for managing your investments in my next post.

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