Economic crisis- What do you need to consider

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To seasoned investors, an economic crisis is not a time to panic, since these have occurred quite commonly over the years. These investors have understood the value of diversifying their investment portfolio after surviving a previous market crashes to get into a more comfortable, low-risk zone finally. However, since the announcement of COVID-19 becoming a public health emergency on 30 January 2020, the world has come to a standstill, and economies have taken a severe hit as a result. 

The current conditions exceeded what even the most skilled financial analysts predicted, as a market reset was bound to happen at some point. With that being said, it becomes important to understand that even the smartest investor, entrepreneur or skilled worker, is feeling uneasy – so, if you are someone who is also stressed about the economic crisis and tensed situations at the moment, you are certainly not alone. 

Granted, this change in the market may just be the best time to chase opportunity. For most individuals, whether you are a first-time investor or a regular investor, the last thing you want to do is expose yourself to further risk during this unprecedented time. In contrast, if your situation allows you to, it may be an excellent opportunity to grow and diversify your portfolio. 

If any of these scenarios apply to you, now might be the time to invest: 

  • You have strong job security 
  • You have existing investments
  • You have a nest egg (Emergency funds)
  • You have a low level of debt and fixed expenses

 

Think long-term, not only in economic crisis conditions

The opportunities currently available in the market are ideal because most investments are cheaper(devalued) compared to a month ago. However, you need to consider that it will take time for the market to recover and be ready to have a longer time horizon.

Don’t fall into an emotional rationale 

It is natural for investors(humans) to get emotional about their investments based on what they see airing on television or the news around social media. Becoming emotional about your investment choices means that you are more likely to fall victim to irrational decision making. Having a plan will help serve as a lighthouse, allowing you to gauge if you want to invest more than usual, or less than usual. If you are taking advantage of the conditions and investing for the first time, make sure to invest and forget, rather than focusing too much on the amount of yield coming in.

For the conservative and emotional investor 

As expected, every investor can’t be positive, and it is certainly not possible for everyone to push their emotional rationale to the side. If you are experiencing risk sensitivity with your investments during this time, it might, once again, be useful to look ahead into the future. In this case, it’s essential to realize that this is normal, markets do fluctuate, and the lowered prices are not realized unless you sell. Furthermore, regular returns in the form of dividends and rental income will provide a steady cash flow.

For those with an insecure job due to the economic crisis

This is a time of immense anxiety for several businesses, as they shift to virtual and limited operations. This anxiety carries forward to individuals in the form of job insecurity. If this sounds like you then it imperative that you focus on sustaining what you already have. This might mean that you miss a few opportunities, but sustaining cash to invest for the long-run, possibly post-pandemic, would be a more suitable option for your peace of mind. 

Here at SmartCrowd, we continuing to work towards providing our community the opportunity to build a portfolio that allows them to have a secondary source of income. We hope to be a platform that provides a level of certainty in an otherwise uncertain time.

READ MORE FROM US – A LETTER TO OUR THE SMART CROWD

P.S – Don’t forget to wash your hands, after reading this blog. Stay safe. You are not alone. 

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