Identifying Opportunities to Invest During a Crisis

Published on September 16, 2020
Categories Investment
invest crisis

The coronavirus pandemic and its repercussions on the economy have investors adjusting their strategy. Knowing where to invest during a crisis can be challenging as the economy is in constant flux and one wrong move could leave you with enormous losses.

As consumers spend less due to an inability to go out as easily, investment strategies are changing and you should look to adjust where you’re putting your money. That’s not to say that a crisis is a bad time to invest.

In fact, these downturns can provide opportunities for large gains when things begin to rebound. The key is in finding the right investments that will ultimately rebound once the pandemic eases.

Here’s a look at how to find investment opportunities during a crisis.

Look for Low-risk Investments

Low-risk investments are generally also low-yield investments. And while you might not like the sound of that, small gains might be better than large losses for your portfolio right now.

An economic recession is not a time to risk it all and choose all high-risk investments.

Instead, focus your investments on companies with good cash flow and little debt. This will be a safe investment option for you to ensure you don’t lose big during these challenging times.

Invest in Industries Consumers Can’t Live Without

investment crisis

While big tech companies seemed to be the ones winning before the economic downturn, streaming services and fancy new devices are something consumers can live without if forced to do so.

During this uncertain marketplace, instead look to invest in companies that sell staples, such as groceries, household goods and beverages.

For example, Home Depot stock is setting record highs right now as consumers are updating and beautifying their homes given how much time they’re spending there. The construction industry is considered essential so building and renovations continue despite changes in other industries.

Diversify Your Investments

When choosing investments, you should always look to diversify where you’re putting your money. That way, if an industry takes a dive, you won’t be left with a portfolio that’s losing money across the board.

This investment strategy is true no matter how good the economy is. But it’s a good reminder to evaluate your investments carefully in light of an entire strategy instead of just putting all your eggs in one basket, so to speak.

Avoid Cyclical Industries

Industries, such as landscaping or other outdoor companies, are something you should avoid during a recession.

While things might look good now, cyclical industries always have downtimes and due to these uncertain times, those downtimes could be much lower than they were before.

And a year from now, they might not rebound in the same way they used to. It’s best to look to recession-resistant industries, such as consumer staples and necessities.

Consider Investing in Real Estate

crisis investment

Real estate is certainly influenced by changes in the economy. However, it also tends to rebound quite well once the economy rebounds. As far as investments go, real estate is a decently safe choice.

While you might not be able to flip real estate quickly, you can use leasing as a stable form of passive income. People tend to favor renting over buying during economic downturns, which means the demand is there for leasing both commercial and residential real estate.

You should work with an investment consulting firm before investing in real estate though. Be very careful with investing in real estate because the area is an important factor in determining how your investment will pay off several years from now when the time comes to sell the property.

Opt for Dividend Stocks

When a company offers dividends, it’s a good sign that they are stable and doing well. Of course, that can change, and dividends can change, but a strong dividend stock can offer passive income and a way to slowly grow your investment accounts in a fairly safe manner.

The same guidelines apply when reviewing dividend stocks as other investments where you want to be sure these companies have low debt and good cash flow. That helps make them a stable company and a safer investment.

Unless you’re trained in investing in the stock market, you might find it difficult to identify these stable dividend stocks. It’s a good idea to discuss the matter with an investment professional.

Investigate Precious Metal Investing

You might have heard about how gold holds its value. Generally, that’s true. Precious metals, including gold, silver, bronze and others can be a good investment option.

Of course, you don’t want to invest solely in precious metals but it can be a good asset in your portfolio.

Invest in Bonds

investment during crisis

Bonds are inversely tied to interest rates. That means that when interest rates decrease, bonds increase. Interest rates tend to fall after downturns in the economy, so the timing could be right to see good returns on bonds.

You still are unlikely to get rich off of bonds, but you might be able to salvage the year with some minor increases to your portfolio using bonds.

Look for Investments in Pandemic Industries

The pandemic brought with it new industries or heightened demand in specific industries. While your investments in pandemic industries might be short-term, they can provide gains during a challenging year of economic crisis.

Think about how food delivery has changed, health care has adapted with increased demand for telemedicine, and more meetings are taking place over video conference than ever before.

Ask your investment consulting firm if getting in on trending stocks during a crisis might help your portfolio this year. Knowing the ceiling for trending stocks is the difficult part because you certainly want to get out before the demand plummets once again.

Startup Businesses Responding to the Crisis

Help new businesses with innovative concepts get started or take the next step in their success. Many entrepreneurs are coming up with new ways to capitalize on the current crisis and turn it into a revenue generator.

Look for crowdfunding opportunities where you get a stake in the company.

This is likely a long-term investment as these arrangements pay out once the company sells, which can take several years. However, the payout is generally pretty lucrative if you can wait for it.

Why You Need an Investment Consulting Firm

Investing your money without expert advice when the economy is good carries with it some risk. But investing your money without expert advice during a crisis is somewhat reckless. Get expert advice and insights from a team you can trust.

Redwood Capital Advisors specializes in unique opportunities including commercial real estate, private financing and private equity. We can help you invest your money where it will be most successful, even during the current market conditions we’re experiencing due to the coronavirus pandemic.

Contact us to learn more about how to work with our team of expert financial advisors.

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