Investing in airline stock is risky because of the high risk and the low return, a financial advisor tells investors.
“Airlines have a long history of going through significant periods of rapid expansion and disruption.
If you are buying shares in airlines, you are paying for a very long period of time,” said James K. Smith, president and chief investment officer at KPMG Investment Advisory.
“So you are in a long-term investment.
But it’s a very different investment if you are getting the same return over the long term.”
The key, says Smith, is to consider the value of the airline’s earnings and the risk of the company going under.
“If you are not confident that the airline will succeed, then you don’t need to buy it,” he said.
Investing at the right time A big mistake many investors make is to invest in airline shares during a downturn, he said, even though the stock price is down.
“In the middle of a market crash, the shares are down more than 25 percent,” Smith said.
“But it’s also very important to consider when it is time to buy.
If the stock is down by 25 percent, then don’t buy it.
But if it is down 25 percent and it goes back up 25 percent the next day, that’s a different story.”
Investing before the crash The stock market crash in 2008-2009 was a tough time for many investors, and the recession was still going on at the time.
Many investors were hesitant to invest because they were concerned about the economy, the stock market and the job market, according to a report from Morgan Stanley.
But some investors were buying shares after the market crash.
“I had a lot of people that had invested in airlines before the recession because I thought that it was a good investment,” Smith told Mashable.
“It was going to be a good stock, so I didn’t want to wait around.”
The first wave of stock buying was in 2007.
But after a series of stock market declines and a number of other economic events, many investors are beginning to think about buying airline stocks again.
“When I started looking at stocks again, I realized that this was the time to invest,” said K.J. Smith.
“The economy is good and we’re getting out of the recession and there’s a lot going on in the market.
If there’s going to continue to be this momentum in the stock, it’s going be a little bit harder to get in, and then you are just a little too late.”
The good news is that the stock markets are now back up again and are trading at levels that are at or near their pre-crash highs.
“For the first time in about a decade, the U.S. stock market is on track to record a 30 percent return,” Smith wrote in a blog post.
“At this point, I believe that there is enough good news to justify an investment in airlines again.”
Invest your money in airlines on the right investment strategies The investment advice from KPMB Investment Advisory is just one example of how a good investor can put together a portfolio that is diversified and diversified in ways that are smart for the company.
It is important to think of the stock in the context of other investments, like real estate and the stock of an airline, said Smith.
For example, he recommends that investors look at the company’s earnings, not just the return on its investments, to determine how much of a return they can expect.
“There is a very big difference between the return you can expect from a small, publicly traded airline company and the return from a big, publicly-traded airline,” Smith explained.
Invest in airline stocks when the market is up The best way to get an investment return on a stock is to get it up in the markets, not to wait for the market to go down, said KPMM Investment Advisory’s Smith.
Invest at the top of the market and don’t take a risk The next best way for investors to get returns on stock investments is to buy them when the stock goes up, not at the bottom of the price range.
“Take a risk when the markets go up,” Smith advised.
“Buy stocks at the highest point in the range.”
The best place to buy airline shares is when the price is rising.
“Invest in the best stock, and make sure you are making the right decisions in terms of what you are investing,” Smith added.
“And you have to make the right investments to be able to do it.”
The next time you are thinking about buying a stock, consider how the company is doing.
For instance, if the stock has gone down by about 20 percent in the last year, then it’s not worth investing in anymore, he explained.
“Then you are doing it the wrong way,” he advised. Instead