Economic Crisis: An Opportunity in disguise for long-term investors

Investing in a critical market is always risky and tends to leave a lingering fear in the mind of the investors regarding their investment venture. A majority of investors are guided by doubts and fear when they think of treading the investment arena amidst the economic crisis. Even though most investors are scared of incurring losses, some investors who are more on the patient side, look at the economic crisis as an opportunity to expand their investment horizon.

Tips for the long-term investor to take advantage of the economic crisis

Besides having liquid assets to make a purchase at every great opportunity, the long-term investors need to be patient and adopt a disciplined approach during a crisis.

Follow these tips to make the most of such situations:

  • Be Patient:Sometimes the market fluctuates haphazardly but it also begins to recover shortly thereafter. Only investors who have been patient during the chaotic phase tend to benefit from it. Investors who panic and sell off their units ultimately end up buying the same at a higher price than those investors who were calm under the weather and refrained from selling off their units in the first place.
  • Bargain more: The market fluctuates and along with it presents the investors with an opportunity to purchase stocks and assets at a comparatively lower price. Smart investors can benefit from the fluctuation by putting their bargaining skills to test and save money on their new purchases.
  • Diversify the profile: Buy units that tend to combat the blows of the economic crisis at a cheaper price during the wavering market and diversify your profile to reduce the intensity of potential losses. Seek professional help to build a full-proof investment profile that will help you make the most of such crisis without much worry.
  • Rupee-Cost Average: With the help of this strategy, investors can lower their overall cost of share price in the long-term. It only works out well if investors strike at the opportunity offered by the economic crisis by increasing their investment or by kick-starting their venture that facilitates rupee-cost averaging.
  • Purchase Dividends: Holding stocks for the long run proves to be most effective in the case where the stocks belong to the large-cap companies with a sound balance sheet, good performance record and attractive dividend payouts. Large-cap companies tend to do well even in an economic crisis and even payout attractive dividends to the investors when other cap-sized companies falter to sustain. Dividends tend to act as a cushion during a crisis because even when the share prices hit rock bottom, dividend stocks outperform non-dividend stocks. Check the company’s track record in terms of their dividend payout and ability to withstand economic blows.

Investors often behave irrationally and get swayed by their emotions under the pressure of the crisis and happen to let go of potential investment opportunities because of it. Patience and rationality are the keys to emerge successful in such a market. Learn from our experts how and why you should take advantage of this economic crisis.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns. Wealth Redefine is a AMFI registered Mutual Fund distributor – ARN - 167127

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