Investing Amid Coronavirus Crisis
The entire world is currently battling serious health that began from the wet markets of Hubei province in China. The novel coronavirus outbreak has put global economies and our lives at a halt. Several countries have declared a state of temporary lockdown to prevent the spread of the deadly virus.
The major impact of imposing lockdown is that most of the economies have suffered and investment markets have crashed. A lot of people are wondering where can they invest during the coronavirus crisis. Share market? Stocks? Gold? What is the perfect investment vehicle that provides optimal returns along with considerable levels of security amid the COVID-19 outbreak?
If you are looking forward to getting an answer to this question you have landed at the right place. In this thread, we will be discussing some of the best investment vehicles and market-based securities to invest your capital. Furthermore, we will be sharing some vital tips and tricks that will help you to maximize your return on investment along with security.
Former President of the United States John F. Kennedy once said that it is important to be aware of dangers a crisis but it is even more important to be aware of the opportunities.
Returns on Investment
A large number of financial experts suggest that during such a crisis it is not possible to expect a V shape recovery instantaneously. The market securities and investment vehicles will consolidate roughly for a period of five to six months. Moreover, the markets and return on investment vehicles will suffer from volatility as a result of which economies will take considerable periods of time to recover.
However, an important point to be kept in consideration amid the coronavirus crisis is that since the equity market is typically tending to discount over the earnings of the next two years, the recovery time of the markets will be quicker than before.
It is quite tricky and difficult at the same time to invest structurally therefore investors can use the next four to six months to invest their surplus capital in stocks, mutual funds, etc. Secondly the most suitable investment tool during phases of political/financial/geopolitical turmoil is gold. The precious metal has managed to maintain its value through ages and is still considered an important investment that provides good returns over short and medium periods of time.
Investors who are looking forward to slower returns over a time frame of two to three years can generate a considerable amount of returns by investing in equity. However, as per the predictions once the situation settles it will probably take another one year for the economies to recover and function normally.
When investing capital during a financial crisis it becomes difficult for users to decide the portfolio allocation. Ideally, the portfolio allocation of an individual should depend on two things i.e. the time horizon after which they expect the returns and secondly the appetite for handling risks during the phases of financial instability.
Young investors who are willing to take risks should invest their capital in a more aggressive way. Contrary to this, aged investors should follow safer strategies and should invest their capital in market-based securities that offer low rates of return but are safe in the long run.
According to financial experts, the coronavirus crisis is an excellent phase to identify the risk tolerance capacity of an individual. Investors can use their risk tolerance capacity to choose investment vehicles and market-based securities. However, an important point to be kept in consideration is that risk tolerance is not static in nature, it has a tendency to change with age and the financial goals of an individual.
Investing is one task, managing the investments is another. Investors who are willing to invest their surplus capital during the coronavirus crisis should devise strategies to manage their investments in the UAE which will help them to accrue better returns with safety. The first and foremost point that strikes when discussing management of investment is the investment fee.
Investors should try and choose investment vehicles and market-based securities that have low fees as it will allow them to invest more instead of spending. Secondly, the correct way to manage investment during any socio-economic crisis is diversification. Diversifying your portfolio will reduce the risks and will ensure that you receive returns.
In order to diversify your investments during the coronavirus try and include vehicles that are inversely related to each other. Doing this will ensure that your capital and safe and is offering returns at the right rate.
In a Nutshell
The coronavirus crisis has shaken global economies and lives of people across the entire globe. To make sure that you are financially safe and secure amid the COVID-19 outbreak it is vital to choose the right market-based securities and the right strategies. Apart from investments, it is important to take care of your health as the only remedy to the fatal virus is social distancing. Stay home stay safe and invest.