My Riskiest Investment of 2021

My investment plan has always been simple. Invest in what you know and hold forever. I like to keep things easy and know my money is stable (ish) and growing. Yes, I’m investing in Bitcoin and other crypto, and will eventually sell at certain profit margins, but we’re not counting that.

I would say about 70%-75% of my portfolio is invested in index funds or ETFs. Like I said, keep things simple and clean. But I do sprinkle some individual stocks as well.

2020 has been a very volatile year for the stock market. We were celebrating our success in such a bullish market until COVID came. We saw our markets hit rock bottom, but recovered in the blink of an eye. Those that invested hard during those times saw profits we can only dream about. 

To those that got in real cheap, congrats! I am very jealous of those who were able to take advantage of that opportunity. But there are still companies that are suffering and have yet to recover from the Pandemic. 

The industry that was among those hit the hardest are the cruise lines. Particularly Carnival Cruise, the industry leader. No one wants to go on a cruise right now. People are still warry and are doing their best to prevent getting COVID. Being stuck on a cruise during these times would be a nightmare and not enjoyable. You would never enjoy yourself, constantly wondering who may have the virus or if everything was cleaned properly. It would be a disaster. Which is why no one is going on a cruise, even into 2021. 

The Reality of Cruises

Carnival had to suspend their operations when the Pandemic occurred, and is still trying to get back on their feet. We are now 9 months into the disruption, and there’s no guessing when their operations will resume. 

While the cruise industry has a questionable future and riddled with risk, the potential rewards for investing in them is huge. They are down 55% this year as of December and still struggling. But that also means we have opportunities for massive profits. 

Carnival is by far the industry leader, raising $12.5 billion through financing and had about $8.2 billion in cash at the end of August. Their monthly burn rate is down to $530 million, but it’s going to be a slow recovery. The company will likely suffer losses until at least 2022. 

But Carnival is big enough to make changes right away. This year they disposed of 18 ships that accounted for 12% of its revenue. But it turns out they were less efficient and accounted for just 3% of its operating profits. 

The Future of Carnival

It’s no secret the cruise line industry is in trouble. They are starting to see reservations for the second half of 2021, but I’m sure those are optimistic people waiting to see how the vaccine affects our current situation. 

Even if the vaccine is successful and turns our world around, people will still have hesitation around traveling in close quarters. People are eager to leave their homes and go explore the world. They need to stretch their legs and take a walk to Disney or some other vacation spot. But cruises are still a source of hesitation. You are surrounded by strangers in closed quarters in the middle of the sea. 

Chances of getting the virus seem high and will put people in a bad mental state. Like I said, no one will enjoy their vacation. Only time will let people recover from the PTSD of living in this quarantined world. 

I am planning to invest in them at the start of the year. I’m optimistic the cruise lines will return, but will likely not be the same for another few years. I’m here for the long game, waiting it out until their stocks return to their original prices. That could mean a great payout for me once that happens. 

But there is no guarantee. It’s a risky move and something I am definitely not that comfortable with. I won’t be investing too much, but enough to see a nice return if things go back to normal. 

Final Thoughts 

I must be crazy to be investing in such a risky stock. The industry is dead in the water (no pun intended) and not a single person is eager to jump back into a cruise. People will need a lot of time to recover from this and eventually be willing to go back to sea.

I’m willing to wait it out for a few years until then with my investments. Until then, I will be on the edge of my seat looking out for any potential news about cruises and if I’m going to lose all the money I put into them.

Again, I’m optimistic they will return back to normal in a few years, but until then, it’s hard to see a business flatline like that. Please don’t invest in anything you can’t afford to lose. My investment in Carnival will not bankrupt me if it fails, nor am I adventurous enough to put too much into it. 

Invest wisely and budget accordingly.