What profitable opportunities do investors see in a problem market? Due to COVID-19, the US government has closed most businesses. People work from home, communicating only over the Internet. The underlying uncertainty behind this pandemic, along with cuts in consumer spending, massive layoffs, and many other factors, quickly turned a strong US economic market into a troubled one. Most of the investors, acutely reacting to market changes, began to sell assets, cash them out, and buy gold. Experienced investors, however, have a different strategy.
Experienced Investor Tips
Warren Buffett, one of the most successful investors in the world, is not a fan of cash and cash deposits in banks: “The worst investment is cash and cash deposits in banks. Everyone talks about how great it is, but over time they devaluate. However, a good business will always grow in value.” Buffett also refers to gold, which he calls a “non-productive asset.” This is why Berkshire never invests large sums in precious metals.
Foreign markets also did not stand aside from the general panic caused by the coronavirus. The most noticeable drop in stock indices to a historic low occurred in Russia (-50.8%). Stock markets around the world have undergone changes: Brazil (-57.8%), Indonesia (-48.0%), South Africa (-46.3%), Egypt (-37.9%), UAE (-36.6%). In addition to economic instability, some countries face political instability, which makes investors worry about investment and savings.
Robert Allen, one of the most influential investment advisors, believes that keeping money in accounts or in cash is not the best solution. “How many millionaires do you know who built their fortune on interest from the deposit?” It is the most quoted phrase of the economist.
Carlos Slim, a Mexican business tycoon, and investor is also a proponent of the best opportunity in times of crisis: “Everyone who refuses to invest now is missing out on a huge opportunity.”
Why Invest During a Recession?
The answer is very simple – due to falling prices. Any market downturn should be viewed as a buying opportunity and not as a reason for panic. According to Warren Buffett, the most profitable and successful investments he made were during a market crash. So, what are the best investment options during the financial crisis?
1. Investing in the Stock Market
Those who are active in the stock market know the rule – you buy when the price falls and sell when the price rises. This strategy is very simple and beneficial. However, it is necessary to study the industry and company trends. If you decide to risk everything and invest where they promise big and quick profits, be prepared for big losses. According to Warren Buffett, experienced and smart investors will be able to teach patience and correct thinking, which, in turn, will lead to significant profits in the stock market.
If you want to buy stocks or other assets, you need first to learn as much as possible about the market and its opportunities. This will help you correctly assess the situations and understand how to act under any circumstances. A good idea is to visit the Forextime blog that will teach you everything you need to know about Forex trading. Trade from Nigeria any time you want!
2. Investing in Debt Obligations of Companies Experiencing Financial Difficulties
Investing in this type of debt securities such as bank loans, investment bonds, or high yield bonds at a discount. Such investments are quite unusual but very relevant in the context of a pandemic. Now there are many industries that have been significantly affected, for example, air travel, hospitality, restaurants, and casinos.
Usually, debt investments are made by institutional investors, but if you are an individual investor willing to take risks, this option is for you. Debt investing strategies for companies in financial difficulty carry a very high risk, so retail investors are encouraged to work with experienced debt investment managers with experience in restructuring, bankruptcy, and negotiating with financial and legal advisors and companies in order to maximize returns.
3. Investing in Real Estate
According to the Wall Street Journal article, more and more investors believe that real estate investment is now the most profitable option and the only opportunity to buy commercial real estate assets at bargain prices.
One such investor is LCP Company that has been successfully managing real estate investments for over 45 years. “It is too early to say how the current situation will affect the value of the commercial real estate, but we believe that now is the time to take advantage of market opportunities – prices for many properties will be sharply reduced compared to their value last year,” Richard Marquard, executive vice president of the company, shared in an interview.
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