Last week, I wrote how this is a good time to invest if you have a lump sum handy right now that you won’t need for the next 5-10 years. In this post, I discuss what to look for when making your investment decisions in the bear market we’re entering.
The stock markets often coincide with global trends in spending, politics, and natural and human-made disasters, to name just a few factors. As an investment professional, I’ve always based my decisions on research. I would research individual companies, the sector/industry, and global trends, and how each of these evolved over a period of time.
You can apply a similar way of thinking now. Here are a few things that come to my mind:
- This too shall pass. It will probably happen slowly because so many people have lost their jobs and they have less money than before, but when the coronavirus pandemic is behind us, the economy will start growing again. I’ve witnessed three financial crises in my lifetime (1998, 2000, and 2008), and each time the global economy rebounded and the markets moved upward again. I believe that this time is no different. While we don’t know for certain how quickly the markets will go back up, but go back up they will eventually.
- We won’t return to “normal.” Even with the pandemic behind us, things will not likely go back exactly to the way they were, or at least not right away. Just as 9-11 forever changed international travel, so can this pandemic. Border security might stay vigilant, and people might not travel right away and instead look for other forms of entertainment and escape. This means, at least for the immediate future, we could be expecting different spending patterns all around the world.
- We will continue to innovate and create. We’re already seeing some incredible human ingenuity in response to the pandemic–scientists and inventors creating new ways to help the sick and governments and industries working together to fast-track new devices and systems to bring lifesaving treatment to those who need it. After the pandemic, we will continue to produce better technology, experiment and test the boundaries of science, and find new solutions to navigate life’s challenges.
- We will need to better plan for the future. The pandemic has also revealed the dangerous cracks in our social institutions, like healthcare and worker protections, and our global economic systems. Director at Rathbones, one of UK’s largest investment management companies, recently called for a sustainability stimulus that would create a sustainable global economy to tackle the world’s complex problems, such as poverty, inequality, and climate change. CEO of Schroders, another UK investment manager, has stated that investment managers have a role to play to allocate capital to companies with long-term, sustainable business models.
These are some of the global trends I think will lead to very specific trends in the stock market in the near future. How to interpret these factors for your own investment strategy depends on your values, your goals (short-term and long-term), and your comfort level with risk.
Even the most respected fund managers have different strategies based on their values. Bill Ackman is an activist investor and has boosted several portfolio companies instead of liquidating his entire hedge fund. Seth Klarman, who is more quality focused, bet against stocks and corporate credit. LongTail Alpha fund focused on credit and insured against volatility.
Investing during volatility and toward sustainability
At Heels & Yield, we’ve created two courses for investing in this turbulent market and for investing in a sustainable future.
- “I want to know how to take advantage of a bear market.”
In December 2018, we launched the Heels & Yield Bear Market Investing Package. Back then, I was skeptical that markets could keep going up. I knew we were due for a downturn in the stock market, and I wanted my clients to be prepared for a bear market (i.e. prolonged period of stock market drop).
After we finished the 3-month package in spring of 2019, the markets dropped 25% within two months and then rallied up again by 35% in the following nine months, as Wall Street and corporate America struggled to keep the markets up. During this time, our students who joined the private mentoring program made significant returns in a short period of time.
We are launching our Bear Market Investing Package again this May 2020-August 2020. Find out more about how you can learn to invest during this volatile market situation.
2. “I want to use my money to make a difference in the world.”
Have you thought about impact investing? Also called socially responsible investing (SRI), you can use your money to support companies with sustainable and ethical business practices.
ESG funds (Environmental, Social, and Governance) are not only socially responsible, but they have been resilient during major market downturns. In the 2008-2008 Global Financial crisis, impact strategies were one of the best areas of investment–many didn’t fall with the falling markets. So far, the same seems to be happening during this pandemic as well.
At Heels & Yield, we believe that investments should have multiple returns–social, environmental, and financial, which is why we are offering Sustainable Investing Package. Find out more about how you can learn to put your money to support sustainable and ethical business practices.
About Heels & Yield
Heels & Yield empowers individuals to manage their finances and to nourish their health and their wealth through its proprietary holistic wealth management practices. To help clients achieve holistic wealth with guidance and accountability, Heels & Yield offers services including group workshops and private wealth mentoring that combines financial education with personal financial coaching.
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