The Next Market Correction Might Not Be Far Off. But There’s No Need to Fear It. In Fact, It’s How I Made a Lot of Money on AAPL Stock Last Year.
If you own a variety of famous stocks - Apple stock, Bristol-Myers Squibb stock, Blackstone Group, etc. - you’re going to grow your net worth over the long term, despite those pesky stock market corrections. But instead of grimacing and watching your invested capital fall during the next stock market correction, would you rather know of a way to profit during that correction?
The reason that I mention stock market corrections, a.k.a. pullbacks, is that the S&P 500 stock market index has risen about 8.7% since it broke free from a recent trading range in late October 2019. At this point in time, a pullback would be perfectly normal. But you don’t have to be its victim. You can prepare for a pullback in advance so that you’re positioned to buy low during the pullback, then reap capital gains as the market naturally recovers. I’m talking about extra profit that you wouldn’t have gained if you didn’t buy low during the market pullback.
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Let’s review a strategy that I frequently employ, which helped me beat the stock market last year in my personal portfolio. And by the way, I don’t buy popular, high-flyer stocks or shares of companies that are losing money or low-priced stocks. I buy the Big Boys, like Apple (AAPL) and Bristol-Myers Squibb (BMY) and Blackstone Group (BX). I want to own such high quality companies that in case I get distracted for half a year by a health incident or a family crisis, I can ignore my portfolio and not worry that it’s going to collapse.
When you look at the price charts on your stocks, you will occasionally see that a stock like AAPL or BX or Nvidia (NVDA) has been going straight up for quite a few months. If you owned these or similar stocks that seemed to defy gravity in 2019, congratulations! You may have doubled your money in about a year’s time. You were lucky, because that’s not normal. When the stock market finally has a pullback, these share prices are going to come down.
What I will typically do with a stock during a huge run-up is this: I’ll use a stop-loss order on some of my shares (but not necessarily on all of my shares), and as the share price rises, I’ll raise the stop-loss order. When the market pulls back, those shares will sell. I’ll set that cash aside and use it in a few weeks to “go shopping” after the stock market seems to have settled down. I love buying low when stock prices are cheap!
How I Made Money Re-Buying Apple Stock
Right now, I have a stop-loss order on 25% of my AAPL shares at 295, and I’ve been raising that stop-loss about once per week. Those shares will sell – it’s inevitable. I fully expect to buy them back at a lower price. For example, my last three purchases of Apple stock took place in 2019 on January 28 at 156.09, May 13 at 187.49 and August 6 at 197.71. As you can see on the price chart, above, that worked out fairly well.
But what if my shares get stopped out, and the stock immediately rebounds? I agree, that could certainly happen, and that’s why I have a fallback plan. I always have a list of stocks at-the-ready that I’m willing to buy when the price is right.
Therefore, if my AAPL shares sell and then quickly rebound, I’ll simply redeploy the cash into another great stock that has a temporarily low price, and reap capital gains as that stock rebounds. After all, my stock portfolio is not supposed to be a shrine devoted to Apple stock, right? My stock portfolio is supposed to be a conduit for capital gains so that I can grow my net worth.
There are many great stocks. As long as I own some of them, I don’t care if I don’t own all of them. Bottom line: stock investing is about making money.
Right now, I have 38 great stock ideas lined up, in addition to the 25 that are featured in my Cabot Undervalued Stocks Advisor portfolio. I’m using stop-loss orders in my personal portfolio so as to raise cash when the market finally comes down a bit, and I’m going to use that cash to buy low. There are enough profit opportunities available so that I don’t have to secretly hoard them. You’re welcome to join me. Just click here.
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