As the old proverb goes, where there is crisis, there is opportunity. Many have made their millions – or even billions – out of timely investments in the right industries. These are 5 good reasons as to why crises are the best time to invest and make huge dividends in the future …
1. Exchange Rates
As anyone who’s kept an eye on the European Union and Brexit knows, Britain’s exit from the EU caused the value of the pound to drop for a while. Though the outlook is still considered patchy, markets have rallied somewhat, and sterling has once again started to rise against the dollar. For those looking to invest in UK property, now is a cheaper time than any is likely to be in the near future.
Of course, it’s not just real estate that could be worth investing in with regards to the UK. Thinking about investing in an interesting business that’s from the UK? Then use the low exchange rate and buy some shares whilst they’re cheaper.
This principle can be applied to any relatively stable and technologically advanced country going through a depreciation in the value of their currency, including us in the US. A little forward-thinking and picking an industry with the potential of building Warren Buffet – style “moats” (being able to withstand competition from other competitors) could mean you can buy bargain-price stocks and shares in a future world-beating company.
2. Stock Prices Are Lower
Economic crises is the best time to invest in stocks on a long-term basis. There is lots to be made when the cost of goods and services is lower, as things are sold off at lower value than they are usually worth. Then, when the crisis is over and people start buying again, the price of the stock increases.
The main thing to remember here, however, is to buy stock that’s actually good. Diversify your portfolio, spread the risk, and don’t bet your life savings. Avoid companies that hold huge amounts toxic assets and outstanding debts, a la Lehman Brothers. Be wise with your investments, and play it safe wherever possible.
Basically, to bring up Buffett again, “Be fearful when others are greedy and greedy when others are fearful.” Or, to put a slightly older spin on it, “Fortune favors the bold.
3. It’s the Best Time to Diversify
As stated twice already above, the price of stocks, shares, bonds and more is cheaper when in crises. Should you have made significant money through real estate, and you want to ensure all your eggs aren’t in one basket, crises present opportunity for future security.
Precious metals and currencies are some of the most common ways of diversifying a portfolio, but there are other things like renewable energy and low-risk, long-term treasury securities, municipal bond funds and money market funds. Should you have cash to spare, investing in a mixture of high risk-high reward and low risk-low return (but long-term) is a good bet.
4. Early-Stage Breakthroughs
Humans have the strange habit of trying to overcome their problems. When bad things happen, or things just don’t go as expected (even if it’s not inherently bad), they try to come up with solutions. Necessity is, as they say, the mother of invention.
This means that, when a crisis occurs, companies will form that attempt to overcome these issues. These are the companies that come up with inventive new technology and novel business solutions to bring to market. Smaller companies that present a threat to bigger players (who may well try to buy the company at some point) present a best time to invest.
5. Property and Land is Usually a Great Bet
The amount of land available at any one time is fixed. Buying when property bubbles burst mean you can get great deals and make huge returns several years down the line. This is especially the case in developed, city areas with access to lots of resources. Bricks and mortar are usually a good way of making decent sums of cash.
Other commodities that are somewhat fixed in terms of supply (like gold, platinum, raw materials and energy sources, for example) are also solid things to invest in during times of crises.
Crises present an opportunity for those who are brave enough – and have the cash to spare – to invest it. Sure, the potential of losses is there, but done wisely, investing during a crisis is exactly what will make you large amounts of money.