The state of stock markets and markets worldwide is causing concern among many investors.
We receive numerous questions regarding the situation, and inquiries from investors asking our opinion on investing during an economic crisis, so here are a few words on investing during an economic crisis.
But first and foremost, it is important to emphasize that this is not a recommendation but simply our perspective on the matter.
To understand whether it is advisable to invest during an economic crisis, freeze investments, or perhaps even withdraw funds and keep them under the mattress at home—it is important to first understand the state of mind of investors.
In our view, someone who invested in shares of a particular company or purchased a rental property is not yet an investor—but rather someone who made an investment.
Being an investor, at least as we see it, means building a personal investment strategy with a long-term perspective.
Being an investor means defining precisely the methods and options for achieving the goals for which the investments are made and selecting investments in the manner that best aligns with those goals.
Investment objectives vary from person to person and from family to family. This could be, for example, retiring more comfortably, securing the future of children, fulfilling dreams, or anything else.
When facing an economic crisis and possibly even an impending recession, such as the one we are likely experiencing, the differences between investors and people who have made an investment become increasingly pronounced.
People who “made an investment” without planning their investment portfolio tend to develop significant concerns; many become stressed and may act out of pressure and a sense of survival, potentially causing substantial damage to their investments and financial resilience.
In contrast, those who are investors managing their investments according to a clear strategy can calmly examine changes, updates, and adjustments to the plan in light of the crisis, and their primary focus can be directed toward identifying opportunities.
Crisis periods always contain an abundance of opportunities for those who are open to seeing them: properties below market prices, companies offering shares at values below their true worth, and so forth.
In conclusion, the question “Is it advisable to invest during an economic crisis or even a recession” is not the right question. The right question is: Are there opportunities for good investments during a crisis? The answer is unequivocally yes.
And to the follow-up question, “Should I invest during a recession?”, here the correct answer is individual and related to your overall investment plan.
It is important to remember that often the average person does not know how to build a balanced investment portfolio independently, and therefore in such situations it is advisable to consult an investment advisor who will provide an investment plan tailored to the investor’s needs and preferences, including their financial situation.
It is important to note, especially if you are investors with a long-term plan, that recessions and volatile markets can be frightening, but if you are investing for the long term, what is usually most important is to remain calm. In many cases, the best thing to do is to do nothing and rely on the resilience of the market and the diversification you have built into your investment portfolio.
And here are also a few summary points:
- Crisis periods may provide an excellent ground for particularly good investment opportunities.
- Use the time to build your investment plan.
- Develop your mental resilience and do not rush to follow the herd.
- A good investment portfolio is one that is aligned with your objectives.
- A good investment portfolio is a diversified portfolio: investments in different sectors, different time horizons, different levels of opportunity and risk.
- History proves that economic crises and even recessions are temporary.
Building an investment portfolio that incorporates all of the above may sound complex, but in practice, successfully addressing each of these elements is a significant victory for your financial future. After you have clarified your objective, go out and seek the opportunities waiting in the market.
