For several years now we have enjoyed a fairly steady investment market, but that’s beginning to change. In the UK, uncertainty around Brexit has led to unsettled market behaviour and worldwide there have been multiple issues contributing to instability. How are businesses adapting to this and how should you be thinking about your investment strategy going forward?
At a time like this, it’s a good idea to keep some money in a fixed deposit arrangement, like a fixed cash ISA. This makes it highly likely that even in the event of major economic problems you’ll have funds available when the markets settle down again. Most major banks offer fixed deposit options for business customers. Bear in mind that if you intend to invest a large amount of money in this way, it’s safer to spread that money across multiple products and it’s useful to have them mature at different times.
There are two great reasons to invest in high-dividend stocks when the markets are volatile. The first is that it’s always useful to have an extra source of income when times are tough. The second is that the fact of this income means the perceived value of the stocks won’t vary as much over time, even if circumstances change quite a bit, so you won’t face as high a risk of losing money as you otherwise might. They can help to stabilise your portfolio and improve the way people perceive your own business potential, which is advantageous if you find yourself looking for investors to tide you through a market downturn.
No matter how the markets are behaving, it’s never a bad thing to bag a bargain, and they are always there to be had. The catch? You’ll have to spend a lot of time looking. It’s difficult to be certain that any one stock that seems to be undervalued will go on to perform above expectations, but you can search for bargains by looking for the sort of stocks that other people are likely to be irrationally nervous about, such as those from companies where a board member has been convicted of fraud but there’s no evidence suggesting anyone else on the board is problematic. If you decide to pursue this strategy, make the effort to do your own research and be wary of tips and hype. Some brokers provide excellent advice on how to approach this, as you’ll see from this degiro review.
The best way to protect yourself in turbulent times is to invest outside your own sector so that if your business falls on hard times due to an economic slowdown, you’ll have resources to draw on from areas of the market that may not have been as badly affected. The more sectors you can spread your assets across, the better insulated you will be against market shocks. Many businesses are also choosing to diversify geographically, buying up assets in different regions, but it’s important to remember that doing due diligence takes more effort in that situation.
Even in an unstable economic climate, some sectors buck the trend. At present, technology is strong and looking to get stronger, and there’s a massive shift towards green companies from renewable energy producers to manufacturers of eco-friendly alternatives to popular plastic products. Healthcare and other services aimed at the elderly are doing well and look set to have a strong future because of the ageing population. It’s also worth considering consumer staples, as there will always be a need for those products even during periods when consumers can’t afford to buy anything else.
Investing in employees
In a volatile situation what really counts is flexibility and there’s no better way to provide yourself with that than to skill up your employees. Sometimes investing your money in staff training and retention is better than any material investment. It increases your potential to make money regardless of how the situation develops and it maximises your potential to adapt. It’s also good for your reputation.
Before you can determine the best way forward for your particular business, you’ll need to think about your aims. Where do you want to be in five years’ time? What degree of risk are you able to tolerate? What expertise can you bring to tracking down the right products? All these factors should influence your choice of strategy. With the right approach, you can keep your business afloat through even the most difficult times, and potentially even take advantage of other businesses’ uncertainty to expand your market share.