Last week, millions of Americans received a stimulus check due to the ongoing COVID-19 crisis. Every American under a certain income threshold received upwards of $1,200 plus another $500 for every dependent. For those fortunate enough to do so, investing the stimulus check can help build a bigger nest egg for the future.
After all, a $1,200 investment in Amazon.com Inc. (NASDAQ: AMZN) in December 2008 would be worth $42,530 today.
Today, we'll discuss several ways to get started if you're interested in investing your stimulus check.
These easy strategies will make it possible for you to maximize your stimulus check and put you on the road to a better financial future.
How to Invest Your Stimulus Check in 2020
Here's the fastest, easiest way to get started investing your stimulus check.
First, you need to pick a broker. In the past, investors had to pay commissions when buying stocks. But recently, large discount brokerages eliminated those fees. So, look at a company like TD Ameritrade or Merrill Lynch as an option. If you bank with a large U.S. institution like Bank of America or JPMorgan, they will have brokerage options with no fees attached.
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Second, we are not interested in buying very expensive stocks that would eat up your entire investment. Instead, you want to consider a few "cheaper" stocks as you build a portfolio.
Finally, we'll want to allocate our money in a smart way to reduce downside risk and help us generate income from that $1,200 (or more) investment.
It's a simple three-part strategy...
Our Three-Part Portfolio for Investing Your Stimulus Check
We'll want to put about half of our money into safe companies that provide steady dividends and sell services used by all people.
In this case, we're targeting a utility company in the electricity generation business - as these companies will remain in high demand in 2020 and beyond. In this case, we can purchase 13 shares of First Energy Corp. (NYSE: FE) for $45.52 per share. This represents an investment of about $592. The stock currently pays a very safe, reliable dividend of 3.43% and offers steady upside in the future.
Next, we'll want to invest about 40% of our money in companies that provide sharp appreciation upside and income as well.
In this case, let's target Walmart Inc. (NYSE: WMT). It might not seem like a great time to invest in retail, but Walmart is much more than a retailer...
Right now, Walmart is the single largest grocery operator in the United States, and demand for food in the last month has increased by 25% year over year. This is a staggering number, and Walmart is poised to grow its market share in the years ahead. This is a stock that in 18 to 24 months could jump as high as $200 per share due to its incredible economic moat. We can purchase four shares of Walmart for about $130 per share.
This leaves us with about 8% of our money left over. And for this, we're going to put this in a more speculative stock that has significant upside in the future.
This speculative position, however, should have some story behind it that allows us to get past the financial crisis.
That's exactly what this small-cap stock provides...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
For this, let's buy 24 shares of MISTRAS Group Inc. (NYSE: MG) at $3.50 per share. This is a company engaged in the inspection and consulting on infrastructure across the United States. Right now, we're anticipating two major catalysts that could send this stock back to its 52-week high of $16.95.
First, the United States will likely engage in another massive stimulus program that targets American infrastructure. Roads, bridges, tunnels, and more must be fixed. The United States is in significant need of an upgrade - and a company like MISTRAS Group would benefit greatly.
Second, MISTRAS also could be heavily involved in the big move of American manufacturing back to the United States. With new supply chains, warehouses, and other industrial properties coming online, it would be a major winner in the new American economy of tomorrow.
Action to Take: As you can see, it's easy to build a simple portfolio with your stimulus check. Put half of your money in companies that offer safe, steady streams of income with little downside. Put another large chunk of money in a firm riding a major trend today. The grocery industry is poised for greater gains in the months ahead. Finally, look to capitalize on next-generation trends or major economic shifts like the ones coming to the United States economy after COVID. It's your choice on what to buy, but your future will look brighter if you invest today instead of spending that stimulus check.
Why Startups Can Have an Edge During a Recession
Uber, Airbnb, Slack, Pinterest, and Venmo have something big in common - something other than their big names.
These startups were founded during the last recession.
And now, some of the most iconic companies of our time could launch into Fortune 500s during days like today.