How Crisis Influences Investing Strategies
At the peak of the global economic crisis in 2008, the little-known manufacturer of household chemicals, Reckitt Benckiser, earned 373 million pounds in one quarter. Along with company profit, those who invested in the industry got rich in record time.
There is nothing unusual in this story – due to the crisis, people began to spend more time at home, and, thus, more time cleaning their living abodes. This is where the Reckitt Benckiser products and funds were needed. This is similar to the COVID-19 situation, in which face masks, soups, and even toilet paper suddenly became must-have products – letting investors and companies earn millions.
Thus, a crisis is not always synonymous with bankruptcy. Wise investors and brokers can actually benefit from the economic recession by increasing their funds. Moreover, the crisis is a periodic phenomenon, but the money invested during this period can provide a foundation for stable income in the future.
How to Implement Different Investing Strategies During the Crisis
Let’s dive into some working strategies to remember.
Avoid the Buy-And-Hold Strategy
Today, buying shares and securities with the expectation that they will not be sold for a long time can be risky. This strategy works well when markets are growing steadily. Economist Gary Shilling advises keeping an eye on your assets as if they are a forest – tend the live, inflationary trees and chop down the dying, deflationary trees.
In other words, be prepared to sell the failing ones at once and catch a trend, gaining the value. Schilling also recommends that you step back and take in the whole forest, rather than getting lost in the trees. So, use a keen eye to assess how the entire state of your holdings.
Check Your Emotions at the Door
Investing can be very stressful. Thousands of people are making the mistake of playing with stocks under emotional distress. If you catch yourself being too sensitive to constant changes, dividend stocks can be an option. Such stocks create a passive income.
Focus on already stable companies that have had dividend payouts for at least 25 consecutive years. That could be one of the best investing strategy for stocks under the crisis and recession. Hint: try to look for companies with low debt-to-equity ratios.
Stop Trading Overactively
It is hard not to keep your eyes on the scoreboard every hour of the recession. Focusing on short-term share-price rather than company value can be a mistake. First, try to find what caused the event. Quantitative investing strategies based on discipline could be one of the ways to predict and analyze such events.
It is designed to collect all the “right” decisions in the business with the fastest computers. If the right inputs are nimble enough, it can predict the abnormal market events and save your money based on quantitative data.
Investment Diversification in 2020
Let’s face it, 2020 is one of the most unpredictable years over the past decade, and likely in the next decade, that’s to come. We’ve prepared some strategies on how to make your money work for you, even with all past and future events considered.
Safe Haven Assets Security from the Default
Keeping safe-haven assets might be the best investing strategy for retirees and new investors. Safe-haven assets allow investors to “weather the storm” – the figurative storm being times of volatility in the market. Such investments are considered to be safe under any market condition. As an example, gold, T-bills, and defensive stocks usually offer protection under the market downswings.
Study Consumer Cyclical Trends
Carefully study cyclical consumer trends, as they heavily depend on economic conditions and the business cycle. Automotive, housing, entertainment, and retail are all parts of this area.
In April 2020 alone, home sales dropped by 18% due to COVID-19, while Netflix stocks increased by 14%. The reason is as simple as in our first example: people are limited to travel and even work, but they have more free time at home.
Money Market Accounts and Saving Accounts
Both can be a short-term strategy solution for investing. A savings account is paid much better than a checking account due to the bank paying you back a percentage of your savings on a regular basis.
It is a highly liquid account, and you can add more money to it if needed. In the short term, there is no risk of keeping money there. But in the long-term, your account can be affected by inflation. That is why saving accounts are not the best investment strategies for retirement.
Money Market accounts are similar to saving accounts, but they require a higher minimum investment. Be sure to find the FDIC-insured money market, so your deposit will be protected from losing money. Similar to saving accounts, due to the liquidity, money market accounts are losing to the inflation rate, but both can be a good strategy for 2020. It is better to make money work than to keep it under the mattress.
How to Predict the Market Trends
Can market trends even be predicted? Officially, all academics say “yes.” Any company’s future has already been experienced by brokers and investors in the past. Only “unforeseen” events will cause price stocks to change. But what are they?
Even COVID-19 cannot be called a black swan, as it was predicted. Indeed, no one wants to risk their own money. If you feel emotionally distressed, unsure about stocks, and lost under current market conditions, try and consult with Einvestment. Enjoy the licensed platform with user-intuitive design and access to major high investing products. If you are looking for high-end investing options, Einvestment offers precisely what you need.
Despite the ongoing global health crisis, there are still many ways to keep and increase your assets. According to GlobalData, we as a society are already changing to “online” base behavior.
The most important takeaway is to keep one eye on trends to increase your assets and another for saving your money. Remember, even in 2009, when all companies were shut under crisis, Whatsapp, Uber, GV managed to become successful start-ups. Sometimes it is not about the stock numbers, but, rather, using common sense and inspiration.