Investment strategies to follow during a crisis
Many investors now fear that another recession is afoot, although most causes of recessions cannot be predicted in advance.
Before anything bad happens, it is a good idea to plan ahead and decide on your investment strategy in crisis. A recession does not mean that all investments should be put on hold; it just means that you have to do smart investment during a recession.
What is an ideal strategy?
There are contexts where the situations that are unfolding are similar to those you have faced in the past. In such cases, you have a fairly good idea about the outcomes that will ensue. In such situations, doing what you have always done, and expecting a different result might not be the best strategy. These situations are ideal opportunities for innovative action. However, when the context is something you have never faced before and your past knowledge is not helping you unravel the situation, it is no time to try anything new. Just fall back on your tried and tested strategies of the past.
We are in the midst of a problem that has not yet fully unravelled itself. We are not in a position to gauge the full impact of the coronavirus pandemic on the world economy. In these uncertain times, the best strategy is to stand where you have been standing in the past and to continue with the investment strategy you had before the pandemic broke out. This is not the time for taking new action.
Here are some quick tips to keep in mind:
1. Low-risk investment:
- Do not take any kind of risk with your investment; it is not the right time to do the experiment.
- Avoid investing in companies that are highly leveraged or speculative.
- Find out companies that have a good cash flow and low debt for safe investment options.
2. Focus on recession-resistant and non-cyclical industries
- Finding a non-cyclical industry offering goods and services is a good investment strategy in crisis.
- Make an investment strategy in crisis for recession-resistant industries like grocery, cosmetics, medical industry, etc.
3. Diversification
- It is a good idea to diversify your business in these tough times.
- It is always good to have different sources of revenue so that you can save your existing business.
- You can start an online service like a paid webinar, online coaching, and can make viral videos. You can also try your hand in food retail or can partner with some health-care company.
4. Dividend stocks
- Dividend stocks can create passive income.
- You can essentially receive a portion of the company’s earnings by investing in dividend stocks.
- Always look for a company that has a low debt-equity ratio.
5. Investment in consumer staples in the equity market
- If you are looking for a safe investment strategy in crisis, the equity market can be a good option.
- It is a good idea to focus on consumer staples or any essential items that people need and buy regardless of their financial situation.
For many people, the financial crisis is scary, but if you have a smart investment plan then it actually is a good opportunity to make money. So be prepared and make money in any crisis.
