The world has changed, and the way that we approach everything else—from how we shop for groceries to how we manage our money—has changed as well. You may find yourself working remotely, trying out new investment strategies, homeschooling kids, or even pivoting your business to focus on a market you never thought you’d be trying to break into. Rather than planning years ahead, you may just be trying to focus on getting through one week at a time.
As we start to move towards the oft-mentioned “new normal,” certain post-crisis trends have begun to take shape—especially in finance. This isn’t the first major shift in the last few decades, and experienced investment professionals will know the ropes of recovery. From the 2007-2009 financial crisis, to the Dot-com bubble, to the current COVID-19 recession, the principle of strategic investing through a crisis remain the same.
Here are four investment strategies to utilize in the post-COVID world, whether you’re a solopreneur, managing family finances, or at the helm of an enterprise.
Follow The Plan
In times of crisis, it can be tempting to throw caution to the winds and try to recoup your losses immediately. This is foolish, especially in investing, where betting on the unknowns is just part of the process. Instead, refer back to your Investment Policy Statement (IPS) and consider how you thought about risk tolerance when things were going well. Chances are, if you stick to your guns, you’ll do better than if you panic and make some rash decisions.
As you separate your emotions from the decision-making process, you may find yourself able to stay the course and come out on top much more than some of your over-eager counterparts. If you don’t have an IPS, take some time to sit down and create a plan regarding your investment goals and timeline, risk tolerance, and rebalancing schedule. This plan will help guide you through even the most challenging markets.
Diversify Your Portfolio
We all know how important it is to diversify. Don’t put all your eggs in one basket, as the saying goes—and if you hadn’t learned this lesson yet, March taught everyone a thing or two. Now, after the worst of the crash is over, it’s more important than ever to expand your knowledge of investing options and diversify your portfolio when possible.
A popular strategy among many of our contacts is hedge style management strategy. We worked with several folks who were actually up big in March, thanks to this management strategy. In practice, this approach can look like long/short equity, market neutral, merger arbitrage, convertible arbitrage, event-driven, capital structure arbitrage, or any of several other iterations of hedge management. While these alternative investments can require a bigger financial commitment up front, they’re also more resilient and can yield active returns. These versatile investment vehicles are a great place to start if you’re looking to branch out.
As with every big shift in the world or in our lives, recovery takes time. Avoid rash decision-making right now, even if you want to see some positive change, stat. According to experts, the recovery from the COVID crash could take a while, and in fact some communities suggest we could be looking at a W-shaped recovery. That’s a lot of curves on the way back to the lifestyles we’re used to!
In the meantime, look for opportunities to patiently make the most of what you have. Continue to invest, regardless of what the market is doing. As long as your investments are diverse and you make no rash moves, you will be very likely to see significant growth on the other side of COVID-19.
Look To The Future
On the bright side, the response to the COVID-19 pandemic will provide an excellent litmus test for both organizations and individuals for the years to come. Use this to seek out the true investment experts and confident leaders who will help you and your company survive troubled times. The test of greatness is never how someone performed in the good times, right? It’s always better to know how someone responds to pressure—and the coronavirus world has provided just that.
Some questions to keep in your pocket: How did you handle the March 2020 crash? How did you guide your clients through that time? Were you prepared for the bear market that followed? Use the answers to these questions to gauge past performance and determine what investors and “experts” you really want to work with. Your portfolio will thank you.
The long and short of it is this: In this strange new world, cooler heads will prevail. Right now, you need someone experienced in piloting through the current storm to the other side in charge of your finances and investment strategies—whether personal or professional. And with future unrest on the horizon, thanks to the election and an ever-uncertain future, you may want to consider changing your approach sooner rather than later.
At GRN Mid-Cities, we keep in contact with a wide network of financial professionals at every stage of their career—including top-level executives. If you’re ready to revolutionize your investment strategies with the help of an expert during this strange time, we can connect you with one who fits your needs.