The following article was suggested by one of our readers—if theres an idea you would like us to cover, please submit it here. Any crisis, be it global or an economic recession can lead to increased uncertainty. This can mean instability when it comes to investment, however experts view this period as that which still holds potential for business ventures. As a financier or aspiring investor, avoiding the risks could mean limiting your chances for business triumph. Businessman Serge Shema believes that what makes any good investor good at what he does is having the ability to take a leap in making investments regardless of the stability of the situation. As an entrepreneur, if your focus is on how good the economy is for you to invest, then growing in business can turn out to be hard, he says. “The reaction you need as an investor may not always be obvious. Foretelling whether you will make profit or not is not always easy to figure out, even when the economy is good. There are always so many factors in play, that even past patterns may not provide a clear direction,” he explains. He is of the view that an entrepreneur taking a leap to invest during a crisis should consider making diversified investments. Diversification reduces risk by allocating investments across various financial instruments, industries, and other categories. A typical diversified portfolio has a mixture of stocks, fixed income, and commodities. “This of course works because returns are maximised by investing in different areas that would react differently to the same event.” He also recommends highly considering strategic investing. “During a crisis, it’s prudent to make investments with stable companies that may for example have established markets for their products and services. And on the other hand, stay away from those that are high-risk or sinking in debt.” Oliver Isaacs, a block chain influencer, investor and advisor notes that a recession doesn’t have to mean that all investments should be put on hold; it just means that different industries and types of companies and investments are safer than others. He recommends for investors to invest in consumer staples in the equity market. When looking for safe investment options in the equity market, it’s a good idea to focus on consumer staples, or essential items that people will need (and buy) regardless of their financial situation. They typically include food, beverages — including alcohol — certain household goods and tobacco. He goes on to add that entrepreneurs ought to focus on non-cyclical, recession-resistant industries. Cyclical goods and services are best avoided during times of uncertainty. They’re the non-essential things that consumers will spend money on less regularly, perhaps influenced by time of year, current economic status of a typical household and a number of other factors. During a recession, it’s best to focus on finding non-cyclical industries offering goods and services that are in constant, year-round demand. In addition to the consumer staples mentioned above, these recession-resistant industries include grocery stores, discount stores, alcohol manufacturers, cosmetics and funeral services. The investor also commends dividend stocks. These, he notes, create a passive income. After investing in a company, you essentially receive a portion of the company’s earnings. It’s generally recommended to look for companies that have low debt-to-equity ratios. Just to be completely on the safe side, you may want to focus only on fully reliable companies, that is, those that have increased their dividend pay outs.
