Buying Stocks at a Discount Price in Volatile Markets
The volatile stock market provides opportunity for investors.
Buying a stock at a discounted price only makes sense, however, if you've snared a bargain that actually pays off in the long run. That is easier said than done.
"We've seen a wipeout of stock prices across market segments with a 'sell now and ask questions later' mentality," said
Fundamentals of a company and its industry remain crucial when shopping among downtrodden stocks, he said, with price history being only one part of the equation. Calm down and keep current market volatility in perspective.
"While volatility is high, it is not extremely high," said
The CBOE Market Volatility Index, or VIX, measures the market's expectation for future swings in the
"The VIX, which historically averages about 20, has lately been at around 30," explained Horan. "During those three other events, however, it hopped up to as high as 80 and was often at 40."
Whenever the economy improves, stock price revivals won't take place across the board.
"This is very different from
When admiring big stock names, remember that you won't make significant money on them unless you pay a really cheap price, Jacobs cautioned.
The shares of youth retailer
Cisco Systems Inc. (CSCO) shares declined this year as the world's leading supplier of data networking equipment and software faces a weak economy and has increased competition in several product categories. Yet the demand for routers and other equipment will continue to grow in our increasingly interactive society.
"Cisco stock is really cheap for a company with a lot of cash that can pay out dividends and do stock repurchases," explained Jacobs. "The downside is so low that it is like you're getting the upside for free."
Johnson & Johnson (JNJ), whose stock isn't down but is nonetheless historically low, has had to deal with product recalls and not having some new drugs approved by regulators. Yet it is still the world's largest, most diverse health-care company.
Besides companies under extreme pressure, there are high-quality firms whose shares are lower mostly as a byproduct of all the mayhem that's been going on around them.
For example, it might seem surprising that Donabedian and Jacobs consider
Banking has been one of the hardest-hit sectors in the market downturn, with stocks such as Bank of America (BAC), JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) down dramatically this year. Of course, investing in them requires having some confidence in both management and regulators.
"These banking stocks are priced to fail, but if you think they won't, they are names worth looking into," concluded Jacobs. "Does anyone really believe that
- Buying Stocks at a Discount Price in Volatile Markets
- 20 Funds That Can Weather Downturns
- Ultra Short-Term Bond Investors Fighting Two Battles
- Investing in the Globe's Emerging Bright Spots
- How to Play Emerging Markets With U.S. Stocks
- What the Treasury Market Is Telling Investors
- Former Google CEO to Appear Before Senate for Anti-Trust Law Investigation
- Are ETFs to Blame for the Rise in Volatility?
- Low Interest Rates Support Higher Gold Price
- Gold ETFs Still Shine in a Diverse Portfolio
- Retirement Investors Who Make a Plan Better Equipped For Volatility
- Smoothest Mutual Funds Offer Stability in Volatile Times
- A Recovery Plan That Works
- Time for Boldness
- A President in Labor
- Government Needs to Help Job Creators and Middle Class Consumers
- Rick Perry Grabs 'Third Rail'
- Rick Perry's Plan to Help Blue States and Big Corporations
- For 2012, Sarah Palin's Time May Have Run Out
- Obama, Abroad, Is Adrift
- Disaster Relief or Corporate Greed -- Choice Should Be Easy
- Some Questions for Dick Cheney
- Back to School and Deeper in Debt
- Bin Laden's Unintended Legacy: Revealing True American Colors
- 9/11 Unity Is Just a Memory
- 9/11 and the Successful War
- Reasons to Remember 9-11
- Did 9/11 Weaken or Strengthen the United States?
- Captives to the Logic of Violence
- Why You Should Give ETFs a Try
- Target Date Funds Have Performed Better in Latest Market Downturn
- Green Technology Stocks Take Their Licks But Keep on Ticking
- Market Turbulence Forcing People to Reassess Gifting, Wills and Estates
- Why Investors Should Choose CDs Over Treasuries
- Are Gold Mining Stocks Set to Take Off?
- 6 Ways to Insulate Your Portfolio from Shocks
- 4 Things Investors Can Learn From Fairholme Fund's Struggles
- What the Latest Fed Policy Means for Your Money
- Weathering Turbulent Markets with Prudence and Patience
- How Do You Preserve Purchasing Power in a Tumultuous Economy?
- Steve Jobs Steps Down as Apple CEO
- HTC Files Another Lawsuit Against Apple
- United-Continental to Deploy 11,000 iPads to Pilots
- Warren Buffett 'Impressed' with Bank of America, Invests $5 Billion
- United-Continental to Deploy 11,000 iPads to Pilots
- General Motors to Manufacture Plug-In Cadillac Hybrid Electric Car
- Google Will Pay $500 Million to Settle Illegal Canadian Pharmacy Ads
- Google Acquires Motorola Mobility in $12.5bn Deal
- HP Unveils New Desktop, Vows Continued PC Support
- IBM Unveils Cognitive Thinking Chips
- The Case For and Against a Stockless Portfolio
- 3 Sites for Picking the Right ETFs for You
- High-Yield Bond Investing Not For the Faint of Heart
- What Standard and Poor's Ratings Downgrade Means for Investors
- Why There's a Disconnect Between Stocks and the Economy
- Investors Have Their Heads in Cloud Computing
- Bank of America Still Has Potential for Rebound
- What Happened to the Muni Bond Blowup
- 5 Factors That Drive Stock Prices
- Health Care a Sound Investment Despite Slow Economy and Reform
- Home Depot: Home Improvement Mecca Struggles to Stay Steady
- Asset Classes for Yield-Hungry Investors
- Defensive Investing Lets You Take Risk With Peace of Mind
- Unusual Stock Funds Intriguing, Still Judged on Performance
- Modern Investors Idolize Financial Hall of Famers
- 6 Risks Every Investor Faces
- The Appeal of Emerging Markets Bonds
- Do Your Investments Love You Back?
- 3M: Resilient Maker of Post-It Notes Tapes Together Solid Growth
- 6 Investing Ideas for Today's Slow-Growth Economy
- The Most Successful Companies Stay Relevant
Investing - Buying Stocks at a Discount Price in Volatile Markets | Successful Investing
(c) 2011 TRIBUNE MEDIA SERVICES, INC.