Seeing these stock prices spike following the market downturn might seem like an exciting opportunity to get in on the action. However, just because a stock is performing well now doesn’t mean it’s a quality investment.
It’s important to consider what will happen when lockdown orders are lifted. Are these companies dependent on the current situation to thrive, or are they serving a need that will exist when we return to some semblance of normality? Have stock values reached their peak, which would mean buying high and at inflated prices, or are they projected to continue growing for years to come? Choosing the right stocks to add to your portfolio depends on much more than what’s happening right now.
That said, if you want to research potential investments that are outperforming the overall market or even growing during the pandemic, O’Shea recommended using a stock screener to compare the performance of various companies to a benchmark like the S&P 500. And keep in mind how stocks fit into your overall financial plan. “In general, it’s best to keep individual stocks to 10% of your portfolio or less; the rest should be invested in low-cost index funds that allow you to diversify your portfolio across all sectors of the stock market, not just one industry or company,” O’Shea said.
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