Investment strategies during Economic and Environmental Uncertainty
The whole world is on the watch. So many things seem to be happening at the same time and many people are in panic. The fear of COVID19 has forced many businesses to a temporarily closure – especially those involved in international trade.
Businesses that depend on importation have been stunted and the uncertainty of when things will be stable again has caused a level of frenzy. To worsen things, the foreign exchange market has been unstable causing increase demand, and the crash in oil prices has spread worry signals across markets globally.
The uncertainty and widespread fear will, no doubt, have started affecting the stock market in terms of demand and supply based on investors panic, availability of financial resources, and sentiment. While investors might not be able to change much about what is happening, they can determine how they react to it. Some simple strategies to put in place during this period include the following:
- Exploit The Opportunities
While the terrain might be even more difficult to predict, history has shown that it also has the best opportunities. For the investors who are willing to take up existing opportunities and positions. It is normal for some stock prices to crash particularly during periods like this such are consumer manufacturing goods that largely depends on foreign materials for production.
As such, investors can choose to be a little more conscious about the opportunities lurking. By monitoring the market landscape for opportunities, investors might be able to pick up high-quality assets at discounted prices. When the market stabilizes, those stocks will naturally grow in value within a short period of time.
- Increase The Stable Companies In Your Portfolio
It might also be a period to increase the availability of stable companies and high dividend stocks in your investment portfolio. The companies that are affected the most during periods of economic downtimes are the cyclical and speculative ones. Companies with high debt are also to be avoided as Foreign Exchange, FX challenges could affect price or slow economic movements might have them not making as much as they should and consequently defaulting on loans.
These companies are risky choices for investors as if things get out of hand, they are the ones that could potentially go bankrupt. For this reason, investing in high-quality companies having good cash flow and very strong balance sheets, will do you a load of good. They might not increase so much in terms of value, but they will give you more peace of mind and possibly even pay good dividends to help you withstand the storms.
- Focus On Your Investment Goals
In periods of uncertainty, the only thing you can truly be certain about is whatever objective you have set in the first place. Economic issues come up every now and then, but they almost always return to the mean eventually. As such, the herd mentality of panic or worry will only lead to you making fear-based decisions that will most likely be costly. It is, thus, important that you understand that in a short but having a long term horizon while, everything will pass and you will be on your way to attaining your investment goals.
What other ideas can you implement?