The stock market has been in a bearish momentum phase since April 2022 and see-sawing every two months. The TSX Composite Index became range-bound as the central bank started an aggressive interest rate hike. Take this year, for instance. In the first nine months of 2023, the market has dipped six times, with the steepest dip witnessed in September. You can make the most of this see-saw momentum and accelerate your portfolio gains without lifting a finger.
In a bear market lies the value
The famous billionaire investor Warren Buffett loves bear markets as it is in such times you find future wealth creators. Investing when others are selling is what makes one rich. But what should you buy in such discounted markets?
A well-diversified portfolio can help you enhance returns and reduce risk. Here are three ways you can book your ticket to higher returns.
Invest in growth stocks to get richer
The stock market is volatile. You might get lucky in a few deals. But all your gains could vanish if you tread without a backup plan. One way is to keep your core portfolio invested in large-cap stocks and put small pockets of investments in high-growth stocks.
One such high-growth stock is Bombardier (TSX: BBD.B). Customers of business jets are not sensitive to inflation, but even they feel the heat of a recession. So far, the company is on track to meet its 2023 guidance of 138 aircraft deliveries. It also has the financial flexibility to withstand a recession as it has no significant debt obligations till 2025 and enjoys a healthy order book of US$14.8 billion.
The stock has slipped 31% since August and is likely to fall further in the next market dip as the economy slows. But the company has the potential to recover and resume growth when the economy revives. BBD could be a high-growth stock that surges 40-60% and makes you richer.
Invest in REITs
Real estate is not exactly a stock you might want to get exposure to in a high-interest-rate environment when mortgage holders are having difficulty meeting their monthly installments. But CT REIT (TSX: CRT.UN) is a relatively safer stock as most stores are occupied by parent Canadian Tire. The REIT has been buying property from its parent and a few third-party property owners. It has sufficient rental income to repay its mortgages and shows no signs of financial troubles. Yet the stock price is falling because of overall weakness in the sector.
Several commercial REITs have slashed distributions, making investors skeptical about real estate stocks. You can take advantage of the market bearishness to buy CT REIT stock below $14 and lock in a 6.5% yield. Once the economy revives, the REIT’s stock could recover to its average price of $16, giving you capital gains, and in the meantime, you can enjoy a higher distribution.
Invest in TSXV to get richer
While we are on the topic of investing a small portion of your portfolio in risky but high-growth assets, you cannot avoid TSXV. The TSX Venture Exchange contains small-cap Canadian stocks with a lower trading volume that makes them riskier than mid- and large-cap stocks. These stocks are highly volatile as their prices tend to move significantly on days when trading volumes are better.
Hive Blockchain Technologies (TSXV:HIVE) is a TSXV stock you could consider buying around $4 per share. This blockchain technology company sees trading volumes mostly when crypto is trending or there is major news around graphics processing unit (GPU) data centres. Hive has an inventory of Bitcoin that it mines. It is now selling subscriptions for GPU-powered cloud services.
You can buy the stock now and wait until BTC starts trending. That is when you will see volumes in the stock. At times like these, you could sell your stock for $8. And if a crypto boom picks up, the stock could even surge past $20. I cannot say with certainty when the stock price will grow. But we can list the events that could trigger growth and be ready to sell the stock when those events materialize. And don’t worry, you may not miss a crypto boom as everyone will be talking crypto.
