How to Invest and Save During a Recession
Rajni Sheth
January 24, 2008
Recession can have a huge ripple effect not only for current projects but also future investments. How can one have recession proof investments? Is there any sector that will not be affected, if you are unemployed and business is worse than last year? Ever since 2008 has started, the keyword ´recession´ is hitting the strongest of the companies. Everyone is on the defensive. The slump in the U.S housing sector and the stock exchange has set back the reserves. It has prompted everyone to consolidate their accounts and portfolios.
Look at the positive side, the recession is bringing some challenging opportunities. This is the time one has to look at the big picture. America is facing economic challenges and it could affect other countries. The Asian markets are already witnessing a yo-yo phase where small investors fear losses. Investments in real estate and stock exchange are already plummeting. The biggest casualties during the recession are FMCG stocks, fly by night operators, small and some mid cap companies. Investments have to be made in companies that are rock steady and have lasted for more than 25 years in the market. These companies are going no where and will survive any of the bubble bursts in recessions to come. There is no point in being bullish at this stage. Diversify the portfolio; sell the old stocks that will not give any more gains.
Despite the American markets having not declared the status of recession, it is still wise to be on guard. Unemployment is rising, lay-offs are no longer surprising, credit crunch, negative trends, real estate bubble bursting, budget deficits and most of all weakening of the U.S dollar are a reality that all of us are facing. Why are we being affected half way across the world? American economy is linked with many other economies in the developing countries. The American economy dented in 2007 despite Asian countries performing well in the stock market.
If we have to survive the American recession we have to be make careful investments. Rather than going for any more stocks or equities it is better to stay safe on the sidelines with cash in hand and look for cheaper investments. Invest in stocks of other countries where the economies are still strong. The Euro and pound is on the top of the heap. For a long time the blue chips will be in European stock exchanges.
These are the economies that will be rock steady in the wake of the American collapse. The year 2008 is critical, which will challenge even intelligent investments. Not all investment is recession proof. Have liquidity around the house. Settle for less and keep calm. Review the portfolio before attempting to diversify. Invest in long term stocks. Go for some traditional fixed deposits to the bank. They are a safer bet.
So, how does one save money during a recession ?
Have you been saving hard for the world trip for the last two years? Looks like the wait will be longer yet. Whether you are a professional, businessman, employee or employer, saving is your profit. Investments are likely to freeze and this is the time to make cuts in every way to save resources.
Just because there is a recession, chances are, there will be less buying and selling. But business will not come to a grinding halt. The real estate sector has seen the biggest upsets of the early recession. It is hard to tell where you can save. Pull and push will be inevitable in most markets. But it could be that the market you are investing in is not really doing so badly. You may stand to make a gain. Most people tend to make the mistake of withdrawing from the fray rather than taking the risk. Go ahead and make the investment. It could be the biggest saver for your financial condition. If your research is right, you may be able to save despite spending during the recession.
In economic slowdown only the stronger companies will have the ability to survive. And those who can innovate during this time are the ones who will drive the market forces.
You can save not only cash by also resourceful talent during the slump period.
Here is what that can be useful:
Don´t just fire anyone, loyalty pays.
Don´t stop the networking with the clients even if you are not doing business with them. When the time is ripe you don´t want them to ignore you.
Take some risk. Being afraid of failure will not be helpful. Avoiding it maybe harmful.
Go on launch the new product. The response will be slow. But when the markets are buoyant, they will pick up.
Don´t get too defensive.
Don´t stop the outsourcing of talent or consultancy. They will help to tide the difficult times.
Saving is not only in terms of liquid cash. Every member in the organisation is a family member. As the family stays through thick and thin, these are the times when it is safe to be together. Give the employees the incentives to save money even during this period. This saving will help them and you as well during the recession. Spend money during this period on garnering goodwill. Have an emergency fund scheme which will take care of at least six months during the period when the recession hits the hardest. This gives time to cope up with the bad times and prepare for the next quarter.
More resources for Asian stock exchanges and definition of recession.
Look at the positive side, the recession is bringing some challenging opportunities. This is the time one has to look at the big picture. America is facing economic challenges and it could affect other countries. The Asian markets are already witnessing a yo-yo phase where small investors fear losses. Investments in real estate and stock exchange are already plummeting. The biggest casualties during the recession are FMCG stocks, fly by night operators, small and some mid cap companies. Investments have to be made in companies that are rock steady and have lasted for more than 25 years in the market. These companies are going no where and will survive any of the bubble bursts in recessions to come. There is no point in being bullish at this stage. Diversify the portfolio; sell the old stocks that will not give any more gains.
Despite the American markets having not declared the status of recession, it is still wise to be on guard. Unemployment is rising, lay-offs are no longer surprising, credit crunch, negative trends, real estate bubble bursting, budget deficits and most of all weakening of the U.S dollar are a reality that all of us are facing. Why are we being affected half way across the world? American economy is linked with many other economies in the developing countries. The American economy dented in 2007 despite Asian countries performing well in the stock market.
If we have to survive the American recession we have to be make careful investments. Rather than going for any more stocks or equities it is better to stay safe on the sidelines with cash in hand and look for cheaper investments. Invest in stocks of other countries where the economies are still strong. The Euro and pound is on the top of the heap. For a long time the blue chips will be in European stock exchanges.
These are the economies that will be rock steady in the wake of the American collapse. The year 2008 is critical, which will challenge even intelligent investments. Not all investment is recession proof. Have liquidity around the house. Settle for less and keep calm. Review the portfolio before attempting to diversify. Invest in long term stocks. Go for some traditional fixed deposits to the bank. They are a safer bet.
So, how does one save money during a recession ?
Have you been saving hard for the world trip for the last two years? Looks like the wait will be longer yet. Whether you are a professional, businessman, employee or employer, saving is your profit. Investments are likely to freeze and this is the time to make cuts in every way to save resources.
Just because there is a recession, chances are, there will be less buying and selling. But business will not come to a grinding halt. The real estate sector has seen the biggest upsets of the early recession. It is hard to tell where you can save. Pull and push will be inevitable in most markets. But it could be that the market you are investing in is not really doing so badly. You may stand to make a gain. Most people tend to make the mistake of withdrawing from the fray rather than taking the risk. Go ahead and make the investment. It could be the biggest saver for your financial condition. If your research is right, you may be able to save despite spending during the recession.
In economic slowdown only the stronger companies will have the ability to survive. And those who can innovate during this time are the ones who will drive the market forces.
You can save not only cash by also resourceful talent during the slump period.
Here is what that can be useful:
Don´t just fire anyone, loyalty pays.
Don´t stop the networking with the clients even if you are not doing business with them. When the time is ripe you don´t want them to ignore you.
Take some risk. Being afraid of failure will not be helpful. Avoiding it maybe harmful.
Go on launch the new product. The response will be slow. But when the markets are buoyant, they will pick up.
Don´t get too defensive.
Don´t stop the outsourcing of talent or consultancy. They will help to tide the difficult times.
Saving is not only in terms of liquid cash. Every member in the organisation is a family member. As the family stays through thick and thin, these are the times when it is safe to be together. Give the employees the incentives to save money even during this period. This saving will help them and you as well during the recession. Spend money during this period on garnering goodwill. Have an emergency fund scheme which will take care of at least six months during the period when the recession hits the hardest. This gives time to cope up with the bad times and prepare for the next quarter.
More resources for Asian stock exchanges and definition of recession.
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