Today the world is witnessing one of the worst health and financial crises ever. Markets have plunged globally in just two weeks and according to the statement issued by the World Bank Group more than 60 million people are likely to face a financial crisis as a result of the current Coronavirus pandemic. Considering the current economic situation, the expected market recovery is expected to take more time than you think.
Most consumers are likely to stay in their homes and are unwilling to spend money due to the fear of infection for the coming months. Before the current uncertain circumstances get better, it’s recommended to plan early enough and determine the specific investment strategy that best fits the current circumstances. An economic recession doesn’t imply that all forms of investment must be on hold. Instead, it means that various industries and different types of businesses and investment opportunities may be safer compared to others.
As an investor, you must learn how to take advantage of every opportunity and get the highest possible rate of return. This isn’t the time to take chances. So, plan effectively. If you are unsure of some investment decisions, talk to an experienced financial or investment expert for reliable insights.
Here are the most viable investment strategies to implement during the global crisis.
Choose low-risk options
An economic recession is the best time to take a risk or start experimenting with the investments. Pay attention to the risk profile of your preferred investment opportunity and focus on playing safe. This isn’t the time to be taking many risks.
That means you must avoid investments in corporations that seem highly speculative or leveraged. Instead, find investment companies with low debt and reliable cash flow just to be sure you are putting your money in the right place.
In most cases, low-risk investments tend to have a lower rate of return. As long as you are not getting negative returns, you may want to consider these opportunities, especially those with guaranteed returns.
It is recommended to invest in consumers’ staples, particularly in equity markets. During the process of looking for the safest investment option, take the time to analyze consumer Staples and other essential products that people buy no matter their current financial situation. These include beverages, food, and other household goods.
People must eat and use other essentials. No matter how harsh the economic times are, there are products and services that people need. Investing in such markets means that you will always get returns. This is why you should consider investing in such markets.
Invest in niches that are recession-resistant
During the period of economic uncertainty, it is in your best interest to avoid cyclical products and services. These are non-essential goods that consumers are likely to spend less money on, particularly when faced with other agent needs. They are influenced by the current economic performance, time of the year, and other factors within or beyond your control.
During an economic recession, it is recommended to find companies in cyclical industries that provide products and services demanded throughout the year. Besides the essential consumer staples listed, other recession-resistant niches include alcohol manufacturers, grocery stores, funeral services, cosmetic products, and discount stores.
Diversify your investment portfolio
You have probably heard the old quote that wants you not to put all eggs in a single basket. A reliable piece of investment advice is to avoid putting all your money in one industry even when you are absolutely sure you will get the desired returns. This is very important, particularly during the hard economic times and unpredictable recession.
Diversifying your resources across multiple industries will cushion you from significant loss if a specific investment or industry fails. The same goes for diversification across different asset classes such as commodities equities and more.
The real estate industry
while a major economic recession can cause serious losses to many sectors, real estate offers a reliable investment opportunity. Generally, a recession causes a significant drop in the value of properties, and that means you could purchase a home at a significantly lower price. Once the economy recovers, you can resell the same property at a larger profit as the prices continue to increase. You may want to check property options on Movoto.com and other similar online platforms.
Meanwhile, it is recommended to rent the house out to tenants. This will help you generate reliable income before selling the property. According to most investment experts, having nice rentals is a great way of raising income. This extra income can help you supplement other income sources.
Precious metals such as gold
Have you ever thought of investing in precious metals? Well, in the commodity market, precious metals such as gold are best renowned for retaining their value even during economic relations and market uncertainty. Silver also performs fairly during economic recessions. Generally, precious metals are likely to generate a relatively safer investment option.
Invest in stocks (Dividends)
One of the effective ways to generate passive income is by investing in dividend stocks. Once you invest in a business, you will essentially get a fraction of the corporation’s regular earnings.
It is in your best interest to identify a company that has a low debt-equity ratio. According to most financial advisors, you were supposed to focus on companies that are fully liable. That means you should consider investing in companies that have been increasing the dividend payouts consistently for the past 25 years or more. This means your income is likely to increase.
According to most financial and investment experts, it’s important to choose less risky investment options during the time of uncertainty. If you have always wanted to invest but don’t know the right opportunity, consult with an expert. The coronavirus pandemic has caused panic and turbulence in nearly all industries. Markets are not the same as before. When choosing an investment opportunity, therefore, pay attention to the specific factors driving the markets.