Due to the Coronavirus outbreak, most of the investors are thinking that another recession will come. Moreover, all this makes sense because the recession is mainly the result of an abrupt drop in spending. So in this article, we will discuss some strategies that you can follow during the Coronavirus Crisis.
However, no one can predict the recession in advance, but it is better to take precautions. Instead of waiting for these circumstances, it is a good idea to plan ahead and decide your investment strategy.
Moreover, a recession doesn’t mean that all your investments should be put on hold. It only means that different companies and different type of industries which will grow during this pandemic are safer than others.
So here are seven tips that you should keep in mind while investing in the time of crisis:
1. Make Low-Risk Investments Only
Recession is not a time to take risks or do experiments with your investments. The best thing you can do at the time of recession is playing safe.
You should avoid investing in companies that are highly speculative or leveraged. Try to focus on companies with low debt and good cash flow.
Avoid taking major risks at the time of crisis. This will be the safest investment option and the best way to save your money during the coronavirus crisis.
2. Invest in Consumer Staples in the Equity Market
If anyone is looking for safe investment options in the equity market, then it is best to focus on consumer staples or essential items that people will need during the time of crisis.
These essential items include food, beverages, alcohol, tobacco, and other household good that people will purchase regardless of their financial situation.
3. Focus on recession-resistant or Non-Cyclical Industries
You should avoid cyclic services and goods during the time of uncertainty. Because these are the non-essential things that people buy less during the time of crisis.
Moreover, during the recession, it is best to focus on finding non-cyclical industries offering services and goods that have constant demand during the whole year.
The consumer staples which are mentioned in the second point are the best recession-resistant industries. Apart from those, some other sectors in which you can invest are grocery stores, discount stores, alcohol manufacturers, cosmetics, and funeral services.
4. Ensure Sufficient Diversification
There is an old saying that does not put all your eggs in one basket. It is the best investing advice for everyone.
So do not invest everything into a single sector even when if that sector is the consumer staples. While investing in consumer staples, make sure you invest in more than one industry.
When you do this, if one industry gets in a greater loss, then also you will not lose your entire investment.
5. Invest in Real State
A significant recession can bring severe problems to various industries, but real estate is a wise investment that anyone can make.
At the time of recession, real estate value decreases, this is an excellent opportunity for you to get a good return on your investment. Because you can buy a property at the lower price and then sell it at a larger profit when prices rise after the markets are recovered.
You can also take the rent on the property to generate passive income during the time of recession.
6. Dividend stocks
These stocks are a great way to create passive income. Investing in a company dividend stock gives you a portion of the company’s earnings.
You should find companies that have a low debt to equity ratios. To be on the safe side, you should focus on fully reliable companies. These are the companies that have increased their dividend payouts for at least 20 consecutive years.
7. Precious Metals
Commodities markets like Gold and Silver are widely famous for retaining its value during periods of recession and uncertainty.
Moreover, these commodities tend to perform well during the recession too. These commodities are very safe to invest during the time of recession.
The financial crisis is a time when you do not need to panic about your investment. It is the time when you need to create a definite plan for your future investments.
Follow all the above 7 points while creating your investment plan for coronavirus crisis. If you follow these points, then you will be on the safer side while making the investments.
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