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The Coronavirus: Keep Calm and Invest On, Should You Gamble or Invest in Stocks in Canada?

Should You Gamble or Invest in Stocks in Canada?

When I first heard about the economic crisis triggered by COVID-19 and how it was affecting the Canadian wallet, I immediately checked on my investments. “Market timing is when people try to get out of the markets at (what they think) is an opportune time, hoping to re-enter at (what they think) will be a better time in the future,” says Andrew Hallam, a financial expert and author of the best-selling book, Millionaire Teacher. “If anyone has a lump sum to invest, but they want to ‘time the purchase’ to coincide with when they think they’ll make more money, this is considered market timing too.”

The Coronavirus: Keep Calm and Invest On

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When I first heard about the economic crisis triggered by COVID-19 and how it was affecting the Canadian wallet, I immediately checked on my investments.

It was gut-wrenching. My portfolio had dropped $20,000 in value overnight. In less than 24 hours, the 6-7% return on investment that I had gained over the past year was wiped out. It didn’t feel good. So, what did I do next?

No, I’m not off my rocker. I’m simply following advice from Nobel Prize-winning economists and successful investors like Warren Buffett. With the current panic-driven markets, I’m going to explain why right now presents an awesome opportunity to build your investment portfolio and why you should “stay calm and invest on.”

Don’t Time the Market

The first rule of savvy investing is: don’t time the market.

Not everyone follows this rule. My retiree dad constantly tries to “beat the market,” pouring over the latest news and acting on hot tips from friends. He logs onto his investing account daily to watch stock rise and fall, trying to find the perfect trading time. Sometimes he “wins,” but other times (like now), he loses. This approach is called “market timing.”

“Market timing is when people try to get out of the markets at (what they think) is an opportune time, hoping to re-enter at (what they think) will be a better time in the future,” says Andrew Hallam, a financial expert and author of the best-selling book, Millionaire Teacher. “If anyone has a lump sum to invest, but they want to ‘time the purchase’ to coincide with when they think they’ll make more money, this is considered market timing too.”

According to the experts, it’s not a smooth move. Billionaire investor Warren Buffett warns that the market timing strategy “doesn’t make any sense” and can endanger financial success. Instead, he advises investors to ignore whatever the market is doing and make regular contributions for the long-term.

“I don’t think I can make money by predicting what’s going to go on next week or next month,” Buffett said. “I do think I can make money by predicting what will go on in the next 10 years.”

Nonetheless, many investors and fund managers stick to the market timing strategy, trying to predict the best times to buy and sell stock. But unless they have a crystal ball or psychic abilities, it’s usually not a winning move.

“Markets move quickly, and you never know when they’ll move,” says Hallam. “Nobody can predict, with any degree of accuracy, how markets will behave. Studies that track what experts say reveal that the world’s leading economists are no better at predicting the market’s direction than a group of chimpanzees.”

Case in point: when CXO Advisory tracked such forecasts over several years, the world’s experts were correct about the market’s direction just 46% of the time.

“Long term, markets rise during about 67% of calendar years,” says Hallam. “So just by staying in the markets, you would have trounced the aggregate returns of these experts, if they actually acted on their predictions.”

That brings me to my next point: buy and hold is your BFF.

Buy and Hold

When markets tank, resist the urge to sell everything, with plans to re-purchase stock later once the market rebounds. For starters, market volatility is normal: one day, “Mr. Market” is sulking in a corner. The next, he’s on top of the world, boasting about his many achievements. Tracking his temperament is a wasted effort – so, what should you do instead?

Ignore him. Your best bet is to build a diversified investment portfolio of stock and bond index funds, and then “buy and hold” for the long-term. Let “Mr. Market” circulate through his never-ending mood swings – because you ain’t selling.

“The money is made in investments by investing and by owning good companies for long periods of time,” Buffett told CNBC in 2016.

Panic-selling is one of the biggest mistakes you can make as an investor. Those who do often end up buying high and selling low. They also often miss out on the best trading days of the decade, which are unpredictable.

In fact, some experts claim that panic-selling leaves investors worse off than staying the course. For instance, The Bank of America Merrill Lynch compared what happened to investors who sold at the first signs of market volatility. Their findings? Buy-and-hold investors outperformed panic-selling investors in every decade, all the way back to 1960.

Returns by Decade: S&P 500 to Panic-Selling Strategy

Decade	S&P 500	Panic-Selling
1960-1969	54%	3%
1970-1979	17%	17%
1980-1989	227%	190%
1990-1999	316%	145%
2000-2009	-24%	-36%
2010 вЂ“ present	84%	40%

Source: Bank of America Merrill Lynch

For most people, it feels awful when you see the numbers drop. Your knee-jerk reaction might be flight over fight. But if you’re decades away from retirement, remember that you have plenty of time to recover from a market downturn. The goal is to build up modest and consistent returns over a long period of time, not find the “right” time to buy “winning” stocks.

“There’s a saying among savvy investors: the most important factor isn’t timing the market – it’s time in the market,” says Hallam.

This leads to my next point: why you should smile when markets sputter.

Celebrate When Markets Sputter

Believe it or not, young investors should celebrate a market downturn.

According to the experts, it works in your favour. In his book If You Can, leading financial theorist William Bernstein says that when stocks dip, investors pay less money to own a greater number of shares. So, if you invest regularly, you can stockpile assets for cheap. Then, when the markets rebound, the value of those assets soar.

“If you aren’t retired or close to retiring, you are a collector [of] stock market units,” says Hallam. “Warren Buffett says that any net purchaser of stock market assets should actually prefer to see stocks fall, not rise. Over time, that allows such investors to put more assets on the catapult, while it’s in the down position. Then when the catapult launches, the investor makes a lot of money.”

Think of it this way: when there’s a major market downturn (like right now), the stocks go “on sale.” Panic-stricken investors start selling off stock, triggering prices to plummet. For smart, young investors, it’s an opportunity to buy ownership in businesses at a deep discount. It’s why Bernstein says that young investors should “pray for a long, awful [down] market.”

Still skeptical? Let’s look at the numbers.

Scenario 1	S&P 500 Stock Market Return	Scenario 2	S&P 500 Stock Market Return
1995	+37.58%	2000	-9.1%
1996	+22.96%	2001	-11.89%
1997	+33.36%	2002	-22.1%
1995-2012	+8.42%*	2000-2017	+5.29%

*The average compound annual return for each respective time period

At first glance, Scenario 1 certainly looks more appealing, with three years of solid gains. But if you break it down further, all that glitters is not gold:

For Scenario 1: Let’s say you invested $50,000 in a portfolio of low-cost index funds, starting in January 1995. For the next 17 years, you deposit $2,000 per month. By December 2012, your investments would have grown to $924,579.

For Scenario 2: You invest $50,000 in a portfolio of low-cost index funds, starting in January 2000. If you add $2,000 per month for 17 years, your investments would have grown to $1,187,309. That’s a difference of $262,730!

What does this prove? Scenario 2 shows how three “bad” years of losses early on in the investment process actually boosted the annual return. This portfolio would have earned a compound annual return of 8.43% per year, even though the market averaged a compound annual return of just 5.29% over that same time period.

The bottom line? With the current economic crisis, now is the time to stock up (just like you did on toilet paper) and keep investing. Block out the noise from Mr. Market and make your regular contributions as if it’s business as usual. If you’re not retired or close to retiring, you only stand to profit from a panic-driven market.

“Rising markets actually disappoint me,” says Hallam. “The longer it can stay in the down position, the better it is for investors.”

Invest Like a Honey Badger

Have you seen the viral video about the honey badger? The joke is that he’s the most fearless animal on the planet, not because he has sharp fangs or claws – but because he “don’t care.” He stays laser-focused on accomplishing his goals (which apparently involve catching snakes and eating larvae), largely ignoring obstacles and his emotions.

When it comes to investing, be “badass” like the honey badger – block out the noise and focus on your financial goals. Of course, that’s easier said than done with the media screaming in the background. So, here are a few practical things you can do to stay the course during the bumpy COVID-19 economic crisis.

Get a Robo Advisor

If you’re spooked by volatile markets, open an account with a Robo Advisor – a digital investment service that can create a personalized portfolio and manage your portfolio. All you have to do is answer a simple questionnaire, and using computer algorithms, it will recommend a customized portfolio suited to your financial goals and risk tolerance.

Then, just set it and forget it! Our favorite, Wealthsimple, charges 0.5% management fees plus MERs based on underlying ETFs, and offers Socially Responsible Investing portfolios and low cost ETFs.

Balance is Key

Your best defense against turbulent markets is to build a balanced, diversified portfolio of low-cost stock and bond index funds. This approach is backed by the experts: Nobel Prize-winning economist Paul Samuelson stated that “the most efficient way to diversify a stock portfolio is with a low fee index fund.” Likewise, it’s what Warren Buffett recommends for most investors. This will not only give you stability but also allow you to reap the rewards of Mr. Market’s many mood swings.

The Robo Advisor will do all the heavy lifting of monitoring and re-balancing your funds. With some Robo Advisors offering as many as 70 (!) portfolios to choose from, everyone from new graduates to retirees can find something to suit their circumstances,

Automate Your Investments

I admit it: that $20,000 that I “lost” made me nauseated. After all, I’m only human and it’s hard to keep my cool when markets are tanking.

So, to remove the emotion from the investing process, I’ve set up an automatic deposit to my to my Wealthsimple Trade account, which transfers from my chequing account on the last Friday of the month. By automating my investments, it steers me away from the temptation to time the market or to act on my erratic emotions. Wealthsimple Trade is also offering new accountholders a $25 cash bonus when you open your account and deposit and trade $100.

What If I’m Retired (Or About to Retire)?

It’s a whole different ballgame if you’re retired or about to retire. Obviously, a stock market crash means taking a hit to your retirement savings, and for retirees, it could make it difficult to maintain their current lifestyle.

Your best defence is to build of a risk-appropriate, diversified investment portfolio of low-cost stock and bond index funds, as well as put aside some savings in a high-interest savings account and in GICs (the safest type of investment in Canada). Like many things in life, it’s all about achieving balance!

For the GICs, consider “GIC laddering” – an investing strategy that involves splitting your investment over several terms. For instance, if you have $50,000 to invest in GICs, you would put $10,000 into 1 to 5-year GIC terms: $10,000 in a 1-year GIC, $10,000 in a 2-year GIC, and so forth. That way, you always have some money maturing (and thereby accessible to you), while taking advantage of the higher interest rates typically offered to longer GIC rates.

Last Words

If you’ve read this far, hopefully, you’re feeling more “chillaxed” about the economic crisis triggered by COVID-19. Maybe you even feel motivated to invest. When the markets fall, remember to stick to your strategy: don’t time the market and don’t sell when things get wild. If you have trouble regulating your emotions, use a Robo Advisor. Go for low-cost index funds and automate your contributions.

Finally, remember that this turbulent time presents a real opportunity for young investors to kickstart their investment portfolios. As the wise Warren Buffett once said, “Be fearful when others are greedy, and greedy when others are fearful.” In this context, that’s sound advice worth buying into.

For more tips on how to handle your finances during the Coronacrisis, read our experts’ opinion and make better-informed decisions.

Should You Gamble on This Gaming Stock?

Susan Portelance | August 11, 2017 | More on: GC

Interested in investing in gaming stocks? Instant tickets are one of those products that do well in good and bad economic times. People can’t seem to resist spending a couple of dollars on the chance they’ll win big. With that thought in mind, let’s take a look at a gaming company you might want to consider for your portfolio.

Pollard Banknote Ltd. (TSX:PBL) is a Winnipeg-based company that bills itself as the leading expert in instant tickets. It has been in operation for over 30 years and creates tickets for more than 60 companies across the globe. Pollard Banknote spends time on extensive market research and algorithm design in its effort to create tickets that people want to buy. The newest addition to the company’s ticket licensed brands is Ms. PAC-MAN tickets, which have been selling well in the U.S. market.

Pollard Banknote by the numbers

What’s to like about Pollard Banknote? Over the last three years, its revenue growth has averaged 10.04% annually, meaning it provides consistent, positive results. Its earnings-growth number looks even better at 30.88% annually — much higher than the industry average of 10.74%.

Pollard Banknote’s return on investor equity number is an impressive 21.34%. (Analysts like numbers in the 15-20% range.) So, the company does a good job of taking investor money and creating positive returns.

If you are interested in dividends, Pollard Banknote’s dividend yield is 1.10%. The company currently pays a quarterly dividend of $0.03. While this rate isn’t high, it’s been the same since 2014, showing consistency in its payouts.

Pollard Banknote hasn’t been making news this week the same way another company, Great Canadian Gaming Corp. (TSX:GC) has, but that’s a good thing. Great Canadian Gaming’s excellent earnings results have pushed its stock price to a new 52-week high, meaning that stock isn’t a bargain right now. Pollard Banknote looks like it has more room to grow in the near future.

Bottom line

If you want to buy and hold a company with consistent results, and one that will likely do well in any economic situation, consider adding Pollard Banknote to your Foolish portfolio.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Susan Portelance has no position in any stocks mentioned.

Got $1,000 to Bet? Buy These 2 Contrarian Stocks Right Now

Puja Tayal | January 29, 2021 | More on: AC BBD.B

I generally don’t recommend buying or trading on momentum stocks. But if you are looking for shares that can make you some quick bucks in a short period, you might want to consider high-momentum stocks. This is a contrarian strategy that might work in the short term. But trade with caution.

A contrarian investment

Now, when we speak of short-term gains, the risk involved is huge. Equity is a long-term investment instrument that balances short-term volatility and gives a handsome return if you stay invested. Hence, I would suggest investing if you are willing to bet $1,000 and are prepared to lose in the short term. There is a significant upside, and you can limit your downside by selling the stock.

Air Canada stock

The first stock in my contrarian list is Air Canada (TSX:AC). There are many reasons to be bearish but only one reason to be bullish, and that is hope. The airline is suffering a multi-year loss, and it will be until it stops burning cash. There is nothing the airline can do about its situation other than cut costs, downsize business, and fly cargo if not passengers.

When you have an airline operating at just 20% capacity, it does not make fundamental sense to invest in the stock. But some positives still keep investors bullish. At a time when passenger airlines have gone bust, with many going bankrupt and many receiving a bailout, AC continues to stand strong without a bailout. AC has $8 billion in liquidity that can keep it running at least for another year.

Moreover, there is pent-up demand for air travel. Any news of travel restrictions easing or a government bailout could send the stock up more than 25% to above $27. Moreover, strong third-quarter earnings from U.S. airlines will drive AC stock. The stock surged 80% in November on vaccine news. That was a good time to encash some profits.

When investing in AC stock, buy the stock at $20-$21 and sell the stock at $27, because the fundamentals will not support this price point. The airline is likely to report more than a $4 billion loss in 2020, and it will take at least five years to return to profit. Until then, the stock will maintain tepid growth. If you invest $700 in AC through the Tax-Free Savings Account (TFSA), you can earn $200 in the short term.

Bombardier stock

My second contrarian pick is Bombardier (TSX:BBD.B), a company known for making planes and trains. The company has been selling off its loss-making businesses to offload the US$10 billion debt sitting on its balance sheet. Once a $36 billion valuation company (in 2000), it is now reduced to $1.78 billion. Its downfall began in 2013 when its CSeries commercial aircraft started having issues, engine failure, development delays, and cost overruns.

Bombardier completed the sale of its rail business to Alstom for €5.5 billion. The deal will help Bombardier reduce its debt and avoid bankruptcy. Bombardier stock surged 66% year to date. The cash injection would give some relief and drive Bombardier stock.

Buy the stock now at $0.7 and sell it as it crosses $0.95-$1.0, as the stock can’t sustain the rally. The Alstom deal will help Bombardier repay some of its debt and survive the pandemic crisis. After the deal, Bombardier would become a pure-play business jet business, but even that business will take time to recover from the pandemic. It expects business jet demand to fall by 30-35%.

Moreover, Bombardier cannot survive long with US$6.5 billion in net debt. Shareholders would still be invested in a loss-making company which is unlikely to return to profit in the mid-term. If you invest $300 in Bombardier through the TFSA, you can earn over $120 in the short term.

Investor takeaway

AC and Bombardier are risky bets, and that is why they are trading at low prices. They are momentum stocks that rise and fall significantly. Their high volatility and weak fundamentals make them a trader’s choice and a value investor’s nightmare. Hence, when trading in these stocks, maintain caution. There are better stocks with strong fundamentals that can give good returns in the long term.

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Fool contributor Puja Tayal has no position in any of the stocks mentioned.

The Similarities Between Day Trading and Gambling

A casino dealer with cards and money on a table

Barry Austin / Photodisc / Getty Images

On the surface, many stock market traders have a strong distaste to being compared to the freewheeling gamblers of Las Vegas or Macau. However, the similarities are nevertheless striking, and understanding these can help you get to the core of trading success. Trading—as opposed to investing for the longer term—can be viewed as a vehicle to generate cash flows just like a business, but understanding the business of gambling can help you understand the business of trading.

Trading Can Be Like Gambling

When it comes down to day trading in any market, you're dealing with odds. We've looked at situations like the Canadian dollar or emerging markets that had a favorable economic picture with which you could buy a stronger currency like the British pound or euro. By taking that simple example of weak commodity currencies or emerging markets in early 2014, the odds were tilted, but not guaranteed, for a trade that took advantage of that imbalance in the market.

As you may know if you've gambled yourself, many people who visit casinos step up to a table to play a game with money on the line and try and earn back their costs for the hotel or flight. However, the massive casino that they've stepped into was built with the money lost by people who didn't understand that the casino that hosts the game makes sure the odds are tilted in their favor. Therefore, to transform from a trader who loses money into one who wins, you must look at how to tilt the odds in your favor like the casino does.& nbsp;

One important difference between day trading and going to the casino is that when you go out to gamble, you have a negative expected return. In other words, the house is always expected to win over the long run, on average. Trading, however, if done skillfully and artfully, can put you in the position of the house.

Improving Your Odds of Trading Just Like a Casino Does

If you walked up to two people and asked if gambling is a profitable business, you'd likely get two different answers. The person who doubted that gambling was a valuable and long-term method to build wealth was likely speaking from experience.

They may have figured if they could find a good system with which to place bets, they could take some money from the casino. However, after a few visits to a couple of gambling houses, they wound up down a few more thousand than expected due to costs for the flight and hotel.

Now, what if the other person that you asked if gambling was a profitable business owned one of the largest casinos in Las Vegas? Their answer would be an emphatic "Yes!" Same question, but two different systems. So how can you put the odds in your favor just like a casino owner?

Stacking the Odds in Your Favor Like a Casino Boss

So what does a Casino boss understand that newer traders do not? Here's a starter list of how casinos stack the odds in their favor and what you can do to implement these strategies in your own trading practices.

Casino: They only play games that give them an edge.

You: For optimal trading results, focus on less trades with higher probabilities.

Casino: They have the unwavering discipline to their risk tolerance through table limits.

You: Maintain a focus on protecting your capital so that you can take advantage of your edge.

Casino: Focus on the overall profitability of the casino by keeping the casino open 24 hours a day.

You: Know that each trade is one of a thousand insignificant trades to build your career.

Closing Thoughts

Trading and gambling are very similar. However, to benefit from the similarities you must increase your odds and think like a casino boss. The best way to trade like a casino operates is to focus on fewer trades that align with your edge and having lower volatility of performance by keeping a disciplined approach to money management so that you don't take a significant drop in your trading progress.

Lastly, you should continue to take the long view of your trading career so that you do not put too much weight on any one trade which often results in over-trading or trading too large of a position for your account equity.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

Is Playing The Stock Market The Same As Gambling?

Is the stock market gambling? That is a question that gets asked from time to time and when you buy a stock and it immediately goes down it sure seems like gambling. When you buy stocks, you can lose all your money. So, what then, is the difference between gambling and the stock market. Are the two really that much different?

Sometimes it may seem that you can lose just as easily at the stock market as you can at the blackjack table. Ask anyone who has lost money in Enron how they felt after their stock went to zero. You can lose big on a stock but rarely do companies go bankrupt and the stock go to zero. In blackjack or craps, however, losing all you have is quite common.

The difference between pure gambling and buying stocks of companies is that you are betting on the future of the company and you have a track record you can research. If you are invested in many stocks, you might say that you are invested in the future of the country. If something terrible happens to the country, like a natural disaster or a terrorist attack, stocks will go down. If the country flourishes and good times prevail, the stock market will most likely go up. By investing in the stock market you might say that you are betting on our future.

Gambling in a casino is a whole different scenario. There is no casino game that the player has an edge. Just take a look at how big Las Vegas has become to be sure that the house always has the advantage. You might be able to beat the house now and again but over the long run you will lose. When you are gambling in Las Vegas, you better be using money you don't need and are prepared to lose.

The key to investing in the stock market is doing research. If you were to just take a list of stocks and throw darts at them, it would be more similar to gambling. However, the more you learn about how companies are valued and operate, the more ammunition you will have when picking stocks.

When you buy a stock and it immediately goes down, it might sometimes feel like you are gambling but that is mostly out of frustration. If you do your homework and pick your stocks carefully, you should be able to make money long term in the stock market. One thing is for sure: the stock market is a much better place to be "betting" your money than the casinos.

Investing in Safe Stocks & Low Volatility Stocks

While we all might love the idea of investing in stocks risk-free, there's no such thing as a stock that's 100% safe. Even the best companies can face unexpected trouble, and it's common for even the most stable corporations to experience significant stock price volatility. We've seen this during the COVID-19 pandemic, during which many strong companies have experienced dramatic drops in stock price.

If you want a completely safe investment with little chance you'll lose money, Treasury securities or CDs may be your best bet.

That said, some stocks are significantly safer than others. If a company is in good financial shape, has pricing power over its rivals, and sells products that people buy even during deep recessions, it’s likely a relatively safe investment.

Seven safe stocks to consider

With the above characteristics in mind, here (in no particular order) are seven stocks or funds that should deliver strong returns over time:

1. Berkshire Hathaway

Berkshire Hathaway (NYSE:BRK.A), (NYSE:BRK.B) is a conglomerate that owns a collection of about 60 subsidiary businesses, including auto insurance giant GEICO, rail transport business BNSF, and battery manufacturer Duracell. Many (like these three) are noncyclical businesses that generally do well in any economic climate.

In addition, Berkshire owns a massive stock portfolio with large positions in Apple (NASDAQ:AAPL), Bank of America (NYSE:BAC), Coca-Cola (NYSE:KO), and many more. In a nutshell, owning Berkshire is like owning many different investments in a single stock. Most of the components were selected by CEO Warren Buffett, one of the greatest investors of all time.

2. The Walt Disney Company

Most people know Disney (NYSE:DIS) for its theme parks, movie franchises, and characters, but there's much more to this entertainment giant. Disney also owns a massive cruise line; the Pixar, Marvel, and Lucasfilm movie studios; the ABC and ESPN television networks; and the Hulu, ESPN+, and Disney+ streaming services.

Its theme parks have tremendous pricing power and do well in most economic climates. Disney's movie franchises are among the most valuable in the world, and its streaming businesses are producing a large (and rapidly growing) stream of recurring revenue.

Disney was not immune to the COVID-19 pandemic, however. The company experienced major revenue declines in fiscal 2020 due to the temporary shuttering of Disney theme parks, Disney’s cruise line, and movie theaters.

The financial effects of those ongoing closures will linger at least through 2021.

Despite these challenges, Disney’s share price has been resilient on the strength of the Disney+ streaming business and the company’s renewed focus on its direct-to-consumer strategy. Those initiatives are driven by the power of Disney's beloved brand and the company’s valuable intellectual property. Those same qualities make Disney a safe investment over the long term.

3. Vanguard High-Dividend Yield ETF

Dividends are a good indicator of a company's stability. What’s more, dividend-paying stocks tend to be more stable during tough times than those that don’t pay dividends.

The Vanguard High Dividend Yield ETF (NYSEMKT:VYM) is an exchange-traded fund that invests in a portfolio of stocks paying above-average dividends. Top holdings include Johnson & Johnson (NYSE:JNJ), JPMorgan Chase (NYSE:JPM), Procter & Gamble (NYSE:PG), and Bank of America, but the fund invests in more than 400 stocks altogether.

4. Procter & Gamble

Procter & Gamble (NYSE:PG) is a mainly noncyclical business that makes products people need in any economic environment. P&G is the parent company behind brands of household staples such as Pampers, Downy, Tide, Charmin, Gillette, Old Spice, and Febreze.

To give you an idea of how steady and consistent Procter & Gamble's business has been over time, consider that the company has increased its dividend for 64 consecutive years. That’s one of the best dividend histories in the entire stock market.

5. Vanguard Real Estate Index Fund

Real estate is an example of an asset that tends to produce excellent long-term growth without too much risk. Real estate investment trusts, or REITs, allow investors to get exposure in their portfolio to commercial properties like office buildings, malls, and apartment buildings.

The Vanguard Real Estate Index Fund (NYSEMKT:VNQ) invests in a diverse variety of real estate stocks, pays an above-average dividend yield, and could be a lower-risk but high-potential long-term investment opportunity.

In 2020, commercial real estate was one of the sectors hit hardest by the pandemic. This is because many of the underlying properties owned by REITs are leased to businesses that depend on people being able and willing to physically go to them. But the long-term investment thesis is sound, and the safety of real estate is intact, especially when you’re investing in a diverse index fund like this.

6. Starbucks

You’d be hard-pressed to find a brand with a bigger competitive advantage than Starbucks (NASDAQ:SBUX). Its trusted brand gives the company pricing power over rivals, and its massive scale gives it efficiency advantages, too. In other words, Starbucks can charge more money while simultaneously benefiting from the cost advantages that come with being such a large company.

Starbucks continues to increase its footprint and its revenue year over year. It's tough to imagine a world where Starbucks isn't the go-to destination for higher-end coffee drinks. Even when the COVID-19 pandemic forced Starbucks to close its inside seating areas, consumers still flocked to Starbucks drive-thru lines to pick up their favorite beverages.

7. Apple

Apple (NASDAQ:AAPL) has the durable advantage of having both an extremely loyal customer base and an ecosystem of products designed to work best in conjunction with one another. In other words, iPhone and Mac users tend to remain iPhone and Mac users.

It's no secret that Apple products cost significantly more than comparably equipped phones, computers, and tablets from rivals. All this together shows that Apple has tremendous pricing power.

Dividend Aristocrats are considered safe stocks, as those companies have increased dividends for at least 25 consecutive years.

What to look for in safe stocks

While no stock is perfect, you can certainly set yourself up with a portfolio of relatively safe stocks if you incorporate a few guidelines into your stock analysis.

If safety is a priority, consider these four benchmarks:

Steady, growing revenue: Look for companies that grow their revenue steadily year after year. Erratic revenue tends to correlate with erratic stock prices, while consistent revenue is more common among stocks with less volatility.

Lack of cyclicality:Cyclicality is a word that describes how economically sensitive a business is. The economy goes through cycles of expansion and recession, and cyclical companies typically perform well in expansions and less well during recessions. For example, the auto industry is cyclical because people buy fewer new vehicles during recessions. On the other hand, utilities aren't cyclical because people always need electricity and water.

Dividend growth: A good way to gauge a company's long-term stability is to take a look at its dividend history, if it provides a dividend. If a company has rarely (or never) cut its dividend and has a strong history of increasing its payout, even in tough economies, that’s a great sign. A Dividend Aristocrat is a stock that has increased its dividends for at least 25 consecutive years, so a list of those stocks would be a good place to start.

Durable competitive advantages: This could be the most important thing to look for. Competitive advantages come in several forms, such as a well-known brand name, a cost-advantaged manufacturing process, or high barriers to entry in an industry. By identifying competitive advantages, you can find companies likely to maintain or expand their market share over time.

Safe stocks can be found in each sector of the market.

These companies have continually proven profitability over time.

These are generally less volatile, more established companies.

Growth investing can require a strong stomach as prices fluctuate.

Red flags that a stock is less safe

On the other hand, there are some telltale factors that indicate a stock is a less safe investment:

Penny stocks: There's no set-in-stone definition of a penny stock, but the term generally refers to stocks that trade for less than $5 per share. While not all the stocks that meet this description are bad investments, nearly all are cheap for a reason. It's a common myth that trading penny stocks is a great way to get rich; it's more likely to have the exact opposite effect.

Dividend cuts: If a stock has a frequent history of slashing or suspending its dividend during tough times, that could be a sign that it's not a stable business in all economic climates. However, many companies prudently suspended dividends during the COVID-19 pandemic. But if a stock didn't have to halt its dividend during this time, that’s a great sign of stability.

Declining or unstable revenue: Most U.S. companies took a revenue hit from the pandemic, but safe stocks will trend back to relative stability over the long term. If a company's revenue is frequently up one year and then down the next, it's tough to make the case that it's a stable business. Consistently declining revenue is an obvious sign of an unsafe stock, but unstable revenue can be just as worrisome.

High payout ratio: This one applies only to stocks that pay a dividend (some great companies don't). If a company pays a dividend, check out the stock's earnings per share for the past 12 months and compare them to the dividend paid. If the dividend represents a high percentage of the earnings (say, more than 70%), that could be a sign that the dividend isn't sustainable.

The recipe for investing in safe stocks

If you're looking to invest in "safe stocks," the above list will get you started. But before you begin, remember these two caveats.

First, one of the best ways to make your portfolio safer is to diversify. As we’ve said, no stock is completely safe from volatility and competition, so by finding relatively safe stocks and spreading your money across a bunch of them, you're giving yourself much more of a safety net than if you just purchased one or two.

Second, the stocks mentioned here (and any others that seem safe) aren't necessarily “safe” over short periods. Even the best-run companies experience short-term price swings, and this has been especially apparent during the COVID-19 pandemic. Don't worry about stock prices over days or weeks, but keep your focus on which companies are most likely to do well over the long haul. And, when it comes to safe stocks like these, short-term share price weakness can make for excellent long-term buying opportunities.

Essentially, the recipe for safe stock investing is to find stable companies, buy a bunch of them, and hold on for the long haul.

The Procter & Gamble Company (PG)

Previous Close	134.28
Open	134.96
Bid	136.70 x 800
Ask	136.75 x 800
Day's Range	134.73 - 137.12
52 Week Range	111.25 - 146.92
Volume	3,509,235
Avg. Volume	8,400,037

Market Cap	335.833B
Beta (5Y Monthly)	0.43
PE Ratio (TTM)	25.77
EPS (TTM)	5.29
Earnings Date	Apr. 20, 2021
Forward Dividend & Yield	3.16 (2.36%)
Ex-Dividend Date	Jan. 21, 2021
1y Target Est	150.88

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Analyst Price Targets (20)

Company Profile

One Procter & Gamble Plaza
Cincinnati, OH 45202
United States
513 983 1100
http://www.pginvestor.com

Sector(s) : Consumer Defensive
Industry : Household & Personal Products
Full Time Employees : 99,000

The Procter & Gamble Company provides branded consumer packaged goods to consumers in North and Latin America, Europe, the Asia Pacific, Greater China, India, the Middle East, and Africa. It operates in five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. The Beauty segment offers conditioners, shampoos, styling aids, and treatments; and antiperspirants and deodorants, personal cleansing, and skin care products under the Head & Shoulders, Herbal Essences, Pantene, Rejoice, Olay, Old Spice, Safeguard, SK-II, and Secret brands. The Grooming segment provides female and male blades and razors, pre- and post-shave products, and other shave care products; and appliances that include electric shavers and epilators under the Braun, Gillette, and Venus brands. The Health Care segment offers toothbrushes, toothpaste, and other oral care products; and gastrointestinal, rapid diagnostics, respiratory, vitamins/minerals/supplements, pain relief, and other personal health care products under the Crest, Oral-B, Metamucil, Neurobion, Pepto Bismol, and Vicks brands. The Fabric & Home Care segment provides fabric enhancers, laundry additives, and laundry detergents; and air care, dish care, P&G professional, and surface care products under the Ariel, Downy, Gain, Tide, Cascade, Dawn, Fairy, Febreze, Mr. Clean, and Swiffer brands. The Baby, Feminine & Family Care segment baby wipes, taped diapers, and pants; adult incontinence and feminine care products; and paper towels, tissues, and toilet papers under the Luvs, Pampers Always, Always Discreet, Tampax Bounty, Charmin, and Puffs brands. The company sells its products through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, specialty beauty stores, high-frequency stores, pharmacies, electronics stores, and professional channels. The Procter & Gamble Company was founded in 1837 and is headquartered in Cincinnati, Ohio.

Gambling on the stock market: are retail investors even playing to win?

Authors

Industry Professor, University of Technology Sydney

Professor of Finance, University of Technology Sydney

Associate Professor in Finance, University of Technology Sydney

Disclosure statement

The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

Partners

University of Technology Sydney provides funding as a founding partner of The Conversation AU.

The Conversation UK receives funding from these organisations

The COVID-19 pandemic has led to a dramatic surge in “mum and dad” retail investors playing stock exchanges across the world.

In Australia, retail investors were net buyers of A$9 billion of Australian stocks between late February and mid-May, according to corporate advisory firm Vesparum Capital. In contrast, the professional institutional investors – superannuation funds and the like – were net sellers of A$11 billion of stock.

The amateurs are therefore likely responsible for most of the market’s rebound since its March 23 low.

An Australian Securities and Investments Commission analysis of retail investor trading shows from February 24 (the day after the market peaked) to April 3, retail investors’ daily buying and selling of stocks was double that of the months before (A$3.3 billion to A$1.6 billion). More than 20% of that activity was from new or reactivated accounts.

bsyJS australian stocks holding up.

The securities regulator has expressed concern this rush of amateurs into the stock market is a train wreck waiting to happen. Its report notes retail investors are, on average, “not proficient” at predicting short-term market movements.

While markets generally recover over the long run and tend to grow with economic fundamentals, short-term trading and poor market timing can be a major risk for investors in volatile markets. Therefore, retail investors should be wary of trying to “play the market” for short-term price movements by day trading.

COVID and risky behaviour

There are several possible explanations for why people are taking a risk on the stock market.

Some might see this as an opportunity to get into the market at a low point, with a view to long-term gains. Others might be out of work and looking to “day trade” - buying and selling shares on short time frames – as a source of income. Yet others may be taking the opportunity of working from home to watch the market through the day.

But another explanation is also worth considering. This is an alternative to gambling. So while it’s risky, it’s arguably no riskier than sports betting, casinos or poker machines.

Risk tolerance

This theory (that this is gambling by another means) explains why the appetite for risk among retail investors has ballooned when the natural response to severe economic uncertainty would be to reduce trading.

The financial risk individuals are happy to tolerate – known as financial risk tolerance – is mostly determined by personality. A person’s risk appetite is unlikely to change substantially over their life, even with changing economic conditions.

Most people, however, are adept at making different risk decisions with money allocated to different “accounts”. In behavioural finance this is known as “mental accounting”.

How they think about and use their different accounts isn’t necessarily “rational”. For example, someone might be very prudent with money from their regular budget account while spending frivolously from a discretionary account.

So extreme risk-taking can occur when opportunities arise despite a person generally being risk-averse.

Dan Peled/AAP

Gambling trends

In the first three months of the year, pollster Roy Morgan estimates about half of all Australians gambled in some form.

Its figures indicated 8.4 million adults spent about A$625 million on lottery tickets, 2.4 million spent about A$2.2 billion on poker machines, and 2.1 million spent about A$1 billion on betting – horses, sports etc.

In Australia, the closure of pubs, clubs and casinos during periods of lockdown has severely curbed these forms of gambling. Between late March and late April, for example, the Alliance for Gambling Reform estimates gamblers saved more than $1 billion on poker machines. The cessation of many sporting events has also reduced betting opportunities.

Pros and cons for society

Does this imply people see the financial markets as just another form of gambling? If so, is this necessarily a bad thing?

If a significant number of people are seriously looking to “day trading” as a way to make money in the short term, the securities regulator’s concerns are valid. There is a good chance most will lose money.

But if these new investors are driven by their interest in gambling, substituting financial markets for poker machines and sports betting, then surely most must be prepared for losses. Very few gamblers are consistent winners from betting on games of chance or sports.

In this context there may not be so much to worry about – albeit acknowledging a small percentage will be “problem investors”, losing more than they can afford.

Compared to the almost certain likelihood of losses on gambling, those rushing into the stock market might just find it more rewarding than casinos, sports betting or pokies.

Are you investing or gambling?

Gambling is defined as staking something on a contingency. However, when trading is considered, gambling takes on a much more complex dynamic than the definition presents. Many traders are gambling without even knowing it—trading in a way, or for a reason that is completely dichotomous with success in the markets.

In this article, we will look at the hidden ways in which gambling creeps into trading practices, as well as the stimulus that may drive an individual to trade (and possibly gamble) in the first place.

Key Takeaways

There are two common traits in those who exhibit gambling tendencies when trading.

If a person trades for excitement or social proofing reasons, rather than in a methodical way, they are likely trading in a gambling style.

If a person trades only to win, they are likely gambling. Traders with a 'must-win' attitude will often fail to recognize a losing trade and exit their positions.

Hidden Gambling Tendencies

It is quite likely that anyone who believes they don't have gambling tendencies will not happily admit to having them if it turns out they are in fact acting on gambling impulses. Yet discovering the underlying motives behind our actions can help us change the way we make decisions in the future.

Before delving into gambling tendencies when actually trading, one tendency is apparent in many people before trading even takes place. This same motivator continues to impact traders as they gain experience and become regular market participants.

Some people may not even have an interest in trading or investing in the financial markets, but social pressure induces them to trade or invest anyway. This is especially common when large numbers of people are talking about investing in the markets (often during the final phase of a bull market). People feel pressure to conform with their social circle. Thus they invest so as not to disrespect or disregard others' beliefs or feel left out.

Making some trades to appease social forces is not gambling in and of itself if people actually know what they are doing. But entering into a financial transaction without a solid investment understanding is gambling. Such people lack the knowledge to exert control over the profitability of their choices.

There are many variables in the market, and misinformation among investors or traders creates a gambling scenario. Until knowledge has been developed that allows people to overcome the odds of losing, gambling is taking place with each transaction that occurs.

Contributing Gambling Factors

Once someone is involved in the financial markets, there is a learning curve, which based on the social proofing discussion above may seem like it is gambling. This may or may not be true based on the individual. How the person approaches the market will determine whether they become a successful trader or remain a perpetual gambler in the financial markets.

The following two traits (among many) are easily overlooked but contribute to gambling tendencies in traders.

Gambling (Trading) for Excitement

Even a losing trade can stir emotions and a sense of power or satisfaction, especially when related to social proofing. If everyone in a person's social circle is losing money in the markets, losing money on a trade will allow that person to enter the conversation with their own story.

When a person trades for excitement or social proofing reasons, it is likely they are trading in a gambling style, rather than in a methodical and tested way. Trading the markets is exciting—it links the person into a global network of traders and investors with different ideas, backgrounds and beliefs. Yet getting caught up in the "idea" of trading, the excitement, or emotional highs and lows, is likely to detract from acting in a systematic and methodical way.

Trading to Win, and Not Trading a System

Trading in a methodical and systematic way is important in any odds-based scenario. Trading to win seems like the most obvious reason to trade. After all, why trade if you can't win? But there is a hidden detrimental flaw when it comes to this belief and trading.

While making money is the desired overall result, trading to win can actually drive us further away from making money. If winning is our prime motivator, the following scenario is likely to play out:

Taylor buys a stock they feel is oversold. The stock continues to fall, placing Taylor in a negative position. Instead of realizing the stock is not simply oversold and something else must be going on, Taylor continues to hold, hoping the stock will come back so they can win (or at least break even) on the trade. The focus on winning has forced the trader into the position where they don't get out of bad positions, because to do so would be to admit they lost.

Good traders take many losses—they admit they are wrong and keep the damage small. Not having to win on every trade and taking losses when conditions indicate they should is what allows them to be profitable over many trades. Holding losing positions after original entry conditions have changed or turned negative means the trader is now gambling and no longer using sound trading methods (if they ever were).

The Bottom Line

Gambling tendencies run far deeper than most people initially perceive and well beyond the standard definitions. Gambling can take the form of needing to socially prove one's self, or acting in a way to be socially accepted, which results in taking action in a field one knows little about.

Gambling in the markets is often evident in people who do it mostly for the emotional high they receive from the excitement and action of the markets. Finally, relying on emotion or a must-win attitude to create profits—rather than trading in a methodical and tested system—indicates the person is gambling in the markets and unlikely to succeed over the course of many trades.

So, let's define, what was the most valuable conclusion of this review: Freaking out about the market's volatility because of the Coronavirs? Not sure what to do with your investments? Keep calm and invest on... at Should You Gamble or Invest in Stocks in Canada?