Where to Invest in Times of Turmoil?
Historically speaking, experts always say to invest in Gold when the markets are falling. However, Gold has been sharping simultaneously with the markets so what is currently the best investment decision?
As we often speak of Bitcoin on the MarketTradersTV Twitch Channel, let's discuss that first. Bitcoin was originally created as a peer-to-peer cash system without any regulatory institutions controlling the supply or targeting macro-economic targets. It often performs well over time due to its deflationary characteristics and it has a limited supply. Regardless, recently we saw the price of Bitcoin go from the 8000USD levels to 3800USD. Now, it is back to 5200USD but most investors were not expecting this price action due to the recent Corona Crisis. We have seen already more than a trillion of USD being 'printed' to sustain the damage in the financial markets, giving Bitcoin a theoretical price boost, but it still hasn't caught much attention.
What about the 'recession-proof' companies like Coca Cola. Coca Cola has also seen a drop in value but not as much as the overall market. This remains a safe investment historically but that does not mean it will perform similarly in the future. Defensive portfolio's (excluding bonds) have also seen returns disappear in a matter of weeks and even with the FED's actions. Also, many traditional stocks have increased their debt-ratio over time to increase spending and upscale the value to shareholders. With the declining markets, companies with high debt positions will suffer the most as they will not be able to pay their debt on time (or perhaps even their interest payments) and will need to sell assets or file for bankruptcy. During the Corona Crisis, one should be looking to invest for the long-term in companies with low debt. These companies will be able to sustain the pain, regardless of what their stock price is currently doing, and will succeed once the markets turns bullish again.
But what other alternatives do investors have to invest in positive returning stocks? If you believe that the markets are going to fall even further down, you could be looking into Virtu Financial Inc., as they focus on high-frequency trading algorithms to make pennies on a trade. But with millions of trades a day this becomes quite a lucrative business as volume picks up and people are both selling as they fear the markets and people are buying as they see cheaper stock prices.
Furthermore, look into companies that generate a lot of business during these times. Companies like Costco has not seen any impact from the Corona Virus and has been going up since their IPO. Supermarkets should be doing fine as they are sold out constantly across Europe and the US. Always keep in mind to never take excessive risk.