Investments are Down, Not Out
3 ways to capitalize on beaten down stock prices
Markets Take a Breather
Friday, the stock market took a breather. Here are the numbers:
S&P 500: dropped -1.32%
Dow: pulled back -0.70%
Nasdaq: fell -2.24%
Since many of you have recently joined the stock and options trading community, here are several ways you could have capitalized on the downturn:
Get in the habit of setting stop-losses when your investments are up. Then, repurchase your investments at lower prices after significant market pullbacks (like Friday). You’d have to alter this strategy during bear markets, but it can be highly effective for maximizing profits during bull runs like the one we’re in right now.
Traders should always trade with the market’s momentum. So, when prices are falling, short-sell instead of purchasing long positions.
Now that prices are down, load up on the stocks currently at buyer’s levels (you’ll need to understand technical analysis). This ensures you’re buying stable companies at reasonable prices, which will significantly benefit you once the bull run continues.
I used a combination of #1 and #3 to make $480 last Friday while the stock market fell.
However, if you didn’t get a chance to capitalize on these techniques, don’t worry. Just because your investments may have pulled back with the broader market doesn’t mean they’re out of the game.
The global economy is expected to pick up steam and grow solidly throughout 2025 despite concerns about changing international trade policies.
So, take a page from the long-term investor’s playbook: now that prices are low, buy more of the stocks you already have—as long as you have stable companies.
Let’s Learn: A Better Way to Calculate Dividend ROI
Last week, we covered “Intro to Dividends.”
This week, let’s discuss a better way to calculate dividend ROI than the yield. Instead, I recommend using the “Dividend Rate.”
The dividend rate gives you an exact dollar amount you’ll be paid for each company share, whereas the yield is always a percentage of the current stock price.
I encourage investors to calculate ROI using the rate because it rarely changes, whereas the yield can change daily.
Calculating ROI: here’s how
You own 100 VZ shares, which pay an annual dividend rate of $2.71 per share, paid quarterly (four dividend payments each year).
$2.71/4 = $0.6775 per share.
100 shares x $0.6775 = $68.00 per quarter.
$68.00 x 4 = $272.00/year.
The benefit?
If your share number doesn’t change and VZ’s rate remains the same, you will never have to calculate this ROI again.
However, if you use the dividend yield, you’ll have to recalculate your return daily as the stock price changes.
Tools and Resources: for traders
Friday, I started reading a new book by one of my favorite investment authors, Mark Douglas.
The book is called Trading in the Zone.
As an already consistently profitable trader, I’m now working on maximizing my returns on every trade made.
For example, I made $480 on Friday while the market fell. However, I missed capitalizing on approximately $2,500 of the money I made that morning.
While $480 is a good return, considering a regular 8-hour workday, it’s $60/hr. But I could have accomplished much more!
The first three chapters of Trading in the Zone have been pivotal in helping me reframe my perspectives and guide me toward a solution I believe will help me maximize my profits.
If you want to maximize your profits, give the book a read: click here.