The year 2022 is probably the most complex year to manage in recent times, with a world market in unabated fall and almost no asset has been spared from the downturns.
Often crises affect sectors or countries, if you make the right choices you will be protected or you can even make money.
The 4 tricks that can make you make money in a crisis
Crises become more aggressive when investors’ behavior becomes contagious, usually because of fear.
Investors are quite predictable in their decisions and have an emotional component that makes their behavior repeat over and over again.
What we can do is to take advantage of the fact that we know what the majority will do and look for profitability with these 4 tricks to get profitability in a crisis.
Avoiding the most common mistake in delicate situations
Buy high, sell low… Fear makes us make impulsive decisions, when we see a negative profitability we tend to think about loss and sell, when in fact we are selling at a time when what we buy is cheaper.
Do not let emotions take control of your investments, discipline is fundamental to take advantage of this environment.
Don’t look at your investment
It seems silly but when you know that things are not going well it is better not to look every day at the evolution of your investment, to avoid emotions playing a trick on us.
If your portfolio is of high quality and well constructed, the profitability will eventually arrive, if you do not watch it, you suffer less and make fewer mistakes.
For this point it helps a lot to have an advisor to tell you what changes or adjustments you should make and avoid having to be reviewing the behavior of your investment every day.
Long-term vision
It is essential to make an effort to look at the long term. Short-term returns are always opportunities for long-term investors.
Being able to buy a portfolio of good quality assets at a -20%/-30% discount is an opportunity that happens once every 8-10 years, but that almost no investor is prepared to take advantage of.
The theory is easy, now you have to be able to put it into practice.
Monthly contributions
At times like this it is much more advisable to make monthly contributions to your portfolio. This allows you to diversify the moment of entry, and to be able to take advantage of more corrections that may come.
In addition, psychologically it prepares us for this market, because all the contributions we make are good.
If the market goes down and you contribute, you will be contributing cheaper, and when the market turns around you will have a better profitability.
If the market goes up, your contribution will be instantly revalued.
How to invest in 2023? How to invest in a crisis?
Although our job as advisors is to help people not to make mistakes, when the market is so complex our efforts must be even greater.
Making a mistake now is difficult to repair, when the stock market goes down investors flee, only to return when it is rising again. Even though investors know the theory, they forget to execute it when fear paralyzes their ability to make decisions based on common sense and the long term.
The work of an advisor is now more important than ever, proof of this is the amount of money that was invested in funds or stocks and when clients are unattended, they reimburse their investments when they are cheaper.
The job of an advisor is not only to recommend investments and supervise them, it is almost more important to help the client emotionally not to make mistakes and to overcome complex moments.
It is also important to remember that markets are like that, there are moments of great returns and moments of great downturns, and that is exactly why profitability exists.
If markets were flat, with no big ups and no big downs, there would be no profitability.