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7 Investment Strategies to Follow During a Crisis – Entrepreneur

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Keep things diverse and low-risk, among other crucial guidance.

March
23, 2020

4 min read

Opinions expressed by Entrepreneur contributors are their own.


Given the extraordinary global circumstances, many investors are now fearing that another recession is afoot. It makes sense, as recessions are often the result of an abrupt drop in spending, although most causes of recessions cannot be predicted in advance. 

Before such a circumstance is certain, it’s a good idea to plan ahead and decide on your investment strategy now. A recession doesn’t have to mean that all investments should be put on hold; it just means that different industries and types of companies and investments are safer than others. Here are some quick tips to keep in mind.

1. Low-risk investments only

A recession is not the time to experiment or take risks with your investments. The most important aspect of anyone’s recession-time investment strategy should be playing it safe. This involves avoiding investments in companies that are highly leveraged or speculative. Focus on finding companies with good cash flow and low debt for the safest investment options. And as a general guideline, try not to take any major risks at an already uncertain time.

Related: Why a Major Crisis Can Be Your Greatest Investment

2. Investing in consumer staples in the equity market

When looking for safe investment options in the equity market — in accordance with the previous point — it’s a good idea to focus on consumer staples, or essential items that people will need (and buy) regardless of their financial situation. They typically include food, beverages — including alcohol — certain household goods and tobacco.

3. Focus on non-cyclical, recession-resistant industries

Cyclical goods and services are best avoided during times of uncertainty. They’re the non-essential things that consumers will spend money on less regularly, perhaps influenced by time of year, current economic status of a typical household and a number of other factors.

During a recession, it’s best to focus on finding non-cyclical industries offering goods and services that are in constant, year-round demand. In addition to the consumer staples mentioned above, these recession-resistant industries include grocery stores, discount stores, alcohol manufacturers, cosmetics and funeral services.

4. Ensuring sufficient diversification

The old saying about not putting all your eggs in one basket comes to mind. A good general piece of investing advice is not to pile into a single sector, even when it includes the aforementioned consumer staples.

This is doubly important during as unpredictable a time as a recession. Diversifying across industries will protect you from greater losses if a particular product or industry loses value. Equally important is diversification across asset classes, e.g., equities, in addition to fixed income and commodities.

5. Investing in real estate

Though a major recession can bring serious loses to many industries, real estate — provided wise investments are made — is usually not among them. Recession usually leads to a drop in home values, meaning that you may be able to buy a property at a lower price and sell it for a large profit when prices rise back up after the economy and markets have recovered. In the meantime, you can rent the property out to a tenant, generating reliable passive income during the interim period.

6. Dividend stocks

Dividend stocks create a passive income. After investing in a company, you essentially receive a portion of the company’s earnings.

It’s generally recommended to look for companies that have low debt-to-equity ratios. Just to be completely on the safe side, you may want to focus only on fully reliable companies, i.e. those that have increased their dividend payouts for at least 25 consecutive years.

Related: Senex Crashed; Here’s What Mutual Fund Investors Should Do

7. Precious metals

In the commodities market, gold in particular is widely known for retaining its value during periods of uncertainty and recession. Silver tends to perform fairly well during recessions, too, and precious metals in general are a relatively safe investment option.

Be well, and invest wisely.

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How Does Investing In Killam Apartment Real Estate Investment Trust (TSE:KMP.UN) Impact The Volatility Of Your Portfolio? – Yahoo Finance

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="If you're interested in Killam Apartment Real Estate Investment Trust (TSE:KMP.UN), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a portfolio. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.” data-reactid=”28″>If you’re interested in Killam Apartment Real Estate Investment Trust (TSE:KMP.UN), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a portfolio. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.

Some stocks mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said ‘volatility is far from synonymous with risk’ in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of one. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content=" View our latest analysis for Killam Apartment Real Estate Investment Trust ” data-reactid=”30″> View our latest analysis for Killam Apartment Real Estate Investment Trust

What we can learn from KMP.UN’s beta value

Given that it has a beta of 0.87, we can surmise that the Killam Apartment Real Estate Investment Trust share price has not been strongly impacted by broader market volatility (over the last 5 years). This means that — if history is a guide — buying the stock would reduce the impact of overall market volatility in many portfolios (depending on the beta of the portfolio, of course). Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Killam Apartment Real Estate Investment Trust’s revenue and earnings in the image below.

TSX:KMP.UN Income Statement April 10th 2020TSX:KMP.UN Income Statement April 10th 2020

How does KMP.UN’s size impact its beta?

Killam Apartment Real Estate Investment Trust is a small company, but not tiny and little known. It has a market capitalisation of CA$1.8b, which means it would be on the radar of intstitutional investors. Small companies often have a high beta value, but they can be heavily influenced by company-specific events. This might explain why this stock has a low beta.

What this means for you:

One potential advantage of owning low beta stocks like Killam Apartment Real Estate Investment Trust is that your overall portfolio won’t be too sensitive to overall market movements. However, this can be a blessing or a curse, depending on what’s happening in the broader market. In order to fully understand whether KMP.UN is a good investment for you, we also need to consider important company-specific fundamentals such as Killam Apartment Real Estate Investment Trust’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Financial Health: Are KMP.UN’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has KMP.UN been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of KMP.UN’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.” data-reactid=”53″>If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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Vietnam to disburse $30 billion of public investment funds this year to tackle virus impact – TheChronicleHerald.ca

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HANOI (Reuters) – Vietnam will aim to disburse $30 billion in public investment funds this year, up 67% year-on-year, the government said on Friday, as it seeks to boost an economy hit hard by the coronavirus outbreak that has infected 255 people nationally.

Public investment, excluding investment made by state-owned enterprises, often accounts for around one-fifth of Vietnam’s total investment and is spent on infrastructure and social development projects.

The Southeast Asian country’s gross domestic product in the first quarter of this year grew at its slowest pace in 10 years, at 3.8% due to the pandemic.

(Reporting by Khanh Vu; Editing by Muralikumar Anantharaman)

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Vietnam to disburse $30 billion of public investment funds this year to tackle virus impact – The Guardian

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HANOI (Reuters) – Vietnam will aim to disburse $30 billion in public investment funds this year, up 67% year-on-year, the government said on Friday, as it seeks to boost an economy hit hard by the coronavirus outbreak that has infected 255 people nationally.

Public investment, excluding investment made by state-owned enterprises, often accounts for around one-fifth of Vietnam’s total investment and is spent on infrastructure and social development projects.

The Southeast Asian country’s gross domestic product in the first quarter of this year grew at its slowest pace in 10 years, at 3.8% due to the pandemic.

(Reporting by Khanh Vu; Editing by Muralikumar Anantharaman)

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