Feel the Fear…and Invest Anyway (Here’s How…)

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Whoosh! Did you see the news about Argentina this week?

The country’s stock market collapsed 48%. Golly!

This is the second biggest collapse in Argentina over the last 70 years.

Investors are fleeing as Argentina inches towards defaulting.

There is a 75% chance that Argentina will suspend debt payments for the next five years, according to Bloomberg.

Reader, there is something I need to tell you.

I want to take you over to Singapore, which is running into its own problems.

Carlos Casanova is an economist for the Asia-Pacific region of insurance company Coface.

He said recently: ‘Singapore is a bellwether for the global trade slowdown. With everything that we are seeing, it is quite possible that there will be a recession in the third quarter of the year.

You might be thinking, ‘What do Argentina and Singapore have to do with Australia? We’re recession free, baby!’

Here’s what we can say. This distress around the world makes for volatile markets and troubling headlines. That means it can feel uncomfortable risking your money in shares.

But it’s becoming desperately hard to find income in ‘secure’ places like term deposits and government bonds.

That means shares need to play some part in your investing strategy.

Callum suggest something he calls the ‘barbell’ strategy. This is a way to keep your core capital in defensive positions but allocate some money to riskier stocks that could have a big payoff.

Here’s one example of how this can work out.

In February, Callum selected five stocks he felt were undervalued in the small-cap sector. One of those stocks is Credible Labs Inc. [ASX:CRD].

It was priced at a lowly 77 cents at the time, and well down from its IPO price in 2017.

But the outlook for the stock was much better than the market was pricing in at the time.

Once investors caught on to the story, it rocketed up to $2.20 recently — and received a takeover offer from Fox Corporation.

That’s a potential 187% return for those gutsy enough to back the idea at the time.

Here’s how that kind of rise looks on the chart…

A screenshot of a map Description automatically generated

Source: Optuma

Now, not all small-cap stock ideas work out like this. But many have this potential.

If you can catch a move or two like this, it can make a big difference to your portfolio.

Interested? See Callum make his case for this strategy here.

Until next time,

Jonathan Evans Signature

Jonathan Evans,
Analyst, Profit Watch