The Buy Low Equation
Please enjoy my latest episode.
Welcome to The Wealth Equation podcast! On this episode of the podcast, your host, Maurice L. Wilson, describes how we can use the quarantining that’s happening as a result of COVID-19 to our financial benefit. Maurice discusses options for making gains in the stock market given the current crisis. Among these options is something called the Buy Low Equation. This equation is essentially the idea of expecting returns from buying discounted stocks. Take the 52-week high divided by the current price equals the return one could expect from that stock once the crisis resolves and the market stabilizes again. Maurice recommends this as an easy way to get into the market without risk of losing much money, as the downturn in the market isn’t related to the company’s performance, but the coronavirus crisis we’re currently in.
Maurice gives some examples of how to apply this equation to real-world stocks (not as actual advice, but strictly as examples). Two of these examples come from airliners, and one from a movie theater chain. He suggests that the best thing about this is that you really don’t even need the stocks to return to their 52-week high in order to make some money.
He also mentions that these kinds of situations don’t happen all that frequently.
“What you really want to ask is: how deeply discounted is this stock?”
“You are making up for lost time if you are buying in this environment.”
“The beautiful thing about this moment is that, assuming the market returns to where it was, if you can buy stuff here, you’re getting it where your returns are literally baked into the price you paid for it.”
What We Covered:
0:50 – Using the coronavirus as an opportunity to build wealth in the stock market.
2:20 – The Buy Low Equation
4:15 – How this is like reaching back in time to purchase an older price.
5:30 – Example with the Vanguard Energy ETF.
6:15 – Example with Boeing.
7:30 – American Airlines example.
9:30 – Don’t confuse share amount with how much you can actually invest, dollar amount.
11:00 – As always, invest with risk potential in mind.