How to invest in the crisis of 2020

Index
    Как инвестировать в 2020 
    How to invest in 2020

    We often said that the crisis - is not very scary , and in some places it’s even financially profitable, and it’s time to talk about how to make money here and now.

    Therefore, today we will talk a little about financial literacy, because without basic rules there is nothing to meddle in any market, regardless of whether it is about stocks, cryptocurrencies or gold. And immediately we draw your attention that this article is not a financial recommendation.

    We simply report on the principles of investor behavior in a crisis, and also share a personal point of view. You can agree with it or not, but regardless of your position, it must be questioned.

    Because any questions regarding finance need to be double-checked and only your own decision made. And if we mention some asset or company, this does not mean that we are right and that we need to do the same. After all, the first rule of financial literacy - not to be confused with the first rule of a fighting club, is to take responsibility for managing money.

     

    Preparation

    Как подготовиться к кризису
    How to prepare for the crisis

    As they said, let's start with the basics, although we are sure that most of You are aware of these financial literacy rules. But we are obliged to make this introduction, because many people know about these rules, but they only observe units, and the rest is attracted by the magic “loot” button and therefore they skip the preparatory stage without thinking. And very in vain, because life punishes for this very painfully.

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    So, regardless of whether the crisis is in the yard or not, you should start by closing current debts.

    We are not talking about Robert Kiyosaki, who loves to talk about how he borrowed and got rich on it. Because in that case we are talking about a loan for the development of a business that generates income. We are talking about bad debts that create losses, and if you have a loan, for example, for a new iPhone, which your companion needed very urgently, and you already spent your salary safely. Therefore, your financial affairs are in a disgusting state, you do not control your money and spend more than you can afford.

    Therefore, step one - start keeping track of expenses in order to find an opportunity to save. If the savings do not produce the desired result, then it is time to look for a second, third, or what kind of job is there. In general, increase your income.

    Step Two - we close debts for the saved money and start saving money for the formation of an airbag. It can be cash or a bank account, for reliability it is better to divide.

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    It is important that you can receive these funds at any time and have enough money for at least two months of life in the usual rhythm, provided that there is no wage or income from business.

    Ideally, these assets should be enough for six months to pay your fixed costs, provided that all this time you will not do anything in terms of work.

    Step Three - we form the capital for investment. Because cash is constantly depreciating as a result of inflation, and our goal is - to earn income to increase our own well-being. Thanks to modern technologies, thanks to which you can start buying assets already with $ 100, but you can simply explore the markets and see how it works with just $ 10.

    It is clear that in order to earn serious income you need to have an impressive amount. But even if you enter a market with little capital, you can still make money, and it will be better than just watching how your savings depreciate as you print new money in the basement of the Central Bank.

    Low risk

    Инвестиции с низким ризком
    Low-risk investments

    The lower the risk on an asset, the lower its profitability. and vice versa, more risk - equals more profit. As a rule, beginners are advised to start with government bonds, especially when it comes to US Treasury bonds. But against the background of the crisis state of the economy and the infuriated printing press, all that can be done with bonds - is to reduce inflation losses. And since our goal with you is to make a profit, we immediately move on.

    If we recall Robert Kiyosaki again, he is an ardent supporter of real estate investment , which he considers to be an asset. It can be criticized for a long time because real estate pays off for a very long time, and during the current crisis, the residential and especially commercial rental market will fall below the baseboard due to the closure of businesses and the loss of people jobs. You can also expect that real estate prices will collapse during the current crisis, at least there will be those who urgently need money and they will be forced to urgently sell.

    Therefore, if there is a sufficient amount, it is logical to try to catch cheap real estate on the market. In order not to risk much, it is better to choose a residential one. Even if then the prices for apartments and rents go even lower and your investment seems to depreciate, the property itself will not disappear. And this market will grow rapidly immediately after the normalization of the economy and will become a stable source of additional income.

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    Such a plan can be called a deal for the lazy. It does not mean that your conditional 5 million rubles will turn into at least five and a half million in a year.

    You should not count on a similar result, but after several years the value of the object will exceed the purchase price and all this time with the right approach, it will generate additional income.

    Obviously, not everyone has the right amount of money, so for them I suggest applying the Warren Buffett method and buying stocks. The stock itself is considered a high-risk asset, but the Omaha oracle teaches us not to speculate and buy business, not securities.

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    These are reliable companies that will confidently go through any crisis and pay dividends stably.

    For Warren Buffett, such a gold mine that constantly generates revenue is Coca-Cola . But if you engage in market analysis, you can find other options. For example, for the Russian market an interesting example can be the securities of Rosneft or Gazprom. Because prices for companies from the energy sector have already fallen in the current conditions and if international quarantine continues, the risk will fall even lower. But both companies pay dividends regularly and the state will save them at all costs.

    As we said at the very beginning, the mention of a company is not a recommendation. We did this to explain the principle that you need to choose those whose business will stay afloat and who regularly pay dividends.

    As for the value of shares, it is quite logical that, like real estate, the next couple of years there will be a loss on them. But in the long term for five or more years there will certainly be an opportunity to get out of them in a good plus. Although Warren Buffett is not engaged in such, and rarely sells securities, constantly generating income.

    High risk

    Высокорисковые активы
    High-risk assets

    We return to the search for profit and, as you know, there are two ways make money on stocks. The first, the receipt of dividend income, we have already considered, and the second is to profit from changes in the value of securities. We will not consider short positions, because playing low is very dangerous and this is the lot of professionals. Moreover, they also often go broke, so we will choose a more relaxed path, which consists in buying shares for a period of three years or more at low crisis prices with an eye to the next more profitable sale.

    We must understand that today we are faced with an unusual crisis, because on the one hand everything indicates the collapse of the global economy. And if we look at the United States, in the first quarter of this year, the country's GDP fell by almost 5%. The last time such indicators were during the 2008 crisis. But today, the US Federal Reserve has already bought up 30% of the country's economy to hold markets.

    The question is whether they have enough strength to prevent the stock market from falling to a new bottom. In our understanding, it is unlikely that we did not manage to quickly overcome the pandemic, the damage to business and the population was enormous, and the worst is expected in the second quarter of this year. But this is again our personal point of view, and as they said at the beginning, it should be called into question and a personal analysis of the situation should be made.

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    A reliable plan for now is to buy stocks gradually in small parts.

    If we made a mistake and the USA will pull the stock market out of ears by injecting trillions of dollars, then we have already begun to enter the market, that is, we almost bought the bottom. But if the truth is on the side of the pessimists and there will be a second bottom, then according to this strategy, cheap stocks will be bought there. This will lower the entry threshold and, in the long term, investing from three years or more will provide a good income.

    The main risk is that not all companies will survive this crisis. Therefore, it is logical in the first place to bet on those whose goods will remain in price. And, secondly, diversify your portfolio by investing in several companies from the same industry at once.

    How to invest in a crisis
     

    As an example, take the two world leaders in the production of aircraft giant aircraft Boing and Airbus. The shares of both of these companies already have an extremely attractive price if you look at the charts. And in light of the fact that the former have had problems with production for a couple of years, and both now have sharply fallen the number of new orders, a further decline can be expected. Obviously, at the current stage of progress, we have no replacement for airplanes, and after the crisis is over, the demand for Boing and Airbus products will return.

    Moreover, in the worst case, when one of the two avmagiants goes bankrupt, then the shares of the second are guaranteed to soar in price and the profit will necessarily compensate for the loss from the purchase of securities of the losing company. Of course, provided that you put both companies at once and had a share in them.

    For the riskiest guys, you can advise cryptocurrencies . In light of the overload of printing machines of Central Banks around the world, confidence in national currencies is falling and this gives Bitcoin an excellent chance to prove itself as a new protective asset and an alternative means of payment.

    Read also:

    Crisis, virus - business: who the mess works for

    Global social experiment: the world never will be the same after the coronacrisis

    Why is the crisis of 2020 not like all the previous ones?

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