With most businesses suffering due to the lockdowns and with demand expected to slow down considerably in the coming months, a lot of investors will be wondering where and how to invest in the future. What such an investor needs to accept is that he is not going to be able to play the market well. When to invest and when to get out of it is going to be very difficult to predict because the rules of the game have been changed in ways we did not foresee earlier. And these rules will continue to change soon.
Be extremely careful about how you maintain your portfolio. Know how to diversify well and in a balanced way, because if the rules of the game change suddenly, you should not find yourself left high and dry with a portfolio of junk stocks.
Look at the future, and not the past
The leading mistake investors make is that they look at what has done well lately, rather than what may do well in the future. This could be a mistake. What has done well so far may not do well in the future. There is no guarantee anymore that it will continue to do well. For example, eating out at restaurants was so prevalent earlier, but now you would rather stay at home and eat a healthy home-cooked meal or order a takeaway from a trusted vendor.
Don’t buy cheap, buy expensive
Some stocks may be expensive right now, but they will be costly because the market sees a lot of potential in them. It is time to buy those ‘expensive’ stocks rather than those supposedly ‘cheap stocks’ that could wipe out your investment. They are cheap precisely because the market does not see good potential in them as of now. Of course, things could change. Unless you know the difference between these two kinds of investments, you are going to be in trouble.
Diversify in a variety of assets
At any point in time, we need to understand that the total amount of wealth does not vary much in short to medium term. When one stock goes up, another goes down and vice versa. All you have to do is stay invested in a variety of good stocks or companies at any given time. Diversify in terms of assets, diversify in countries, diversify in currencies, just don’t put all your eggs in one basket.
Cash is not a good investment
Another mistake people make at times of upheaval or crisis, is that they think cash in the safest investment. That is entirely false. When they can’t rely on bonds to keep their money safe, they immediately turn to cash because they are unable to see how deep the crisis is, and they want to be ready for the worst. Cash is a safe investment because it doesn’t have volatility. But it taxes you and your buying power, so cash in the worst investment.
If you want to be successful in the future, you should think unconventionally. Invest in a little in gold, invest in a little in real estate, invest in a few good stocks, invest in a few suitable currencies, invest in a few useful commodities, and maybe invest in a few of your friends’ good businesses. So even if the definition of money gets redefined during this crisis, you will have something to fall back on. Put simply, if you want to be safe, diversity, diversity, diversity.
Thank you for reading this post, should you have any suggestions or feedback, please feel free to share your thoughts in the comments below.