Investing During the Financial Crisis

One of the things that said most often about investment during troubling economic times is that investors need to take things slowly. This is easier said than done, as a growing number of investors have taken a major hit even with investments that were once considered low-risk and conservative. But the answer to making back those losses is not to make any rash moves with high risk investments. You’re just as likely to take a deeper hit.

So the name of the game right now is to take it slowly and not to panic. You can rest assured knowing that the economy is more than likely going to head in the opposite direction. I’m not going to say anything as hackneyed as, “These things are cyclical.” But there’s no reason to think that the financial crisis is going to last at full capacity for the next ten years. Yes, things are dire, but things will improve.

What this means is that you can wait for certain investments to grow again. Even though you may be looking to make significant gains in the short term, to offset recent losses, your real aim should be long term – three years or more. This should give current investments enough time to rebound. It also gives you time to diversify and possibly invest in certain stocks that have hit a low but will head in the opposite direction. There are as many opportunities as pitfalls right now, so long as you can be patient and wait for those stocks to turn around, as well as the economy on the whole.

Your investment strategy should not change dramatically: diversify and don’t make rash choices if a stock takes a fall. In this climate, that is more inevitable and it doesn’t mean it won’t rebound.

Investing During a Depression

It’s too soon to call this a depression, but that almost doesn’t matter. Just the idea that it could be a depression, or even a recession, is enough to send the economy tanking further. It’s like a self-fulfilling prophecy. Some knowledge can be gained by looking at how investing functioned during the Great Depression. In the 30’s, some stocks still remained strong, such as electronics stocks. Radio was the wave of the future and those stocks still had viability.

This should tell you that even now there is a good potential for investment. Tech stocks are normally the most volatile, but they’re also the future of investing. The same goes for green technology: something talked about by tree huggers not so long ago but now is mainstream. There is going to be a high demand in recent years. Of course, a green start-up can be a high-risk venture – especially if the company is not diversified into other industries – but there is a huge upside as well. Again, this boils down to patience. Because people are tightening their belts, no new green company (a green green company, as it were) will be making enormous profits short-term. But as a long-term strategy, green investments are a positive opportunity, similar to radio in the 30’s.

Stayed tuned for more investment advice in future posts, including Forex investing, Alpha mutual funds, the Alternative Investment Market, and other strategies.