Entrepreneur, investor, and founder & CEO @VirtuseExchange
I lost a lot of money during the 2008 financial crisis. And before the corona crisis hit, I had made sure I don’t repeat the same mistakes. So, I made a plan and stuck to it.
For now, I’ve succeeded, but I believe that one of the crucial things for an investor is to preserve the capital.
So, I’ve researched intensely to try to get my hands around the current market situation.
And here is my list of eight investment strategies for current times:
1. Stick to your strategy
First and foremost, if you already planned your strategy, stick to it.
You might tweak it here and there, but don’t scrape it off. Perseverance and consistency are key.
2. Keep some cash
It’s challenging to argue a case for holding cash during the money printing era.
Ray Dalio, the founder of the world’s largest hedge funds, was recently outspoken about holding dollars when he said that “cash is trash.”
But, even Dalio still has some cash in his portfolio, and I believe it’s always a good idea to have a safety net.
So, have at least a one-year emergency fund in cash. There might be some fantastic investment opportunities ahead.
3. Buy gold
I’ve always been bullish on gold.
But after Warren Buffett recently got exposure to gold, and Dalio tripled his gold allocation, I became even more bullish.
Make no mistake.
The world’s largest investors have become aware that endless quantitative easing poses a risk to global currencies.
These people are the market leaders, not followers, and they sent us a strong signal.
And if other large investors jump on the trend, the gold sector is going to explode.
4. Buy Bitcoin
Bitcoin has been one of the best-performing assets in 2020.
People sometimes describe Bitcoin as digital gold. But I believe it has even better properties than gold.
For example, can anyone say how much gold there is in the world?
I didn’t think so.
So, unlike gold, Bitcoin has provable scarcity. There is only 21 million Bitcoin in supply, and over 18.4 million have already been mined.
On top of that, Bitcoin more divisible and borderless than gold, making it effortless to move across the globe.
I’m firmly in the Bitcoin camp on this debate, and I believe that it’s is superior to gold in almost every aspect.
5. Diversify with ETFs
The saying, “Don’t put all of your eggs in one basket,” couldn’t apply more to current times.
And what’s a better way to diversify than with exchange-traded funds (ETFs).
ETFs are a type of mutual fund. They are pooled investment vehicles that offer diversified exposure to a particular area of the market.
With ETFs, you can quickly allocate your investment across all asset classes and all countries.
You can bet on US equities, China, gold, bonds, or commodities and build an “all-weather portfolio,” which could perform well regardless of the market conditions.
6. Buy stablecoins
Don’t like keeping money in the bank? Don’t have the stomach for Bitcoin volatility?
Stable coins give you the best of both worlds. They make money easier to transfer but without the volatility of Bitcoin.
A stable coin is a cryptocurrency backed by another asset. This asset can be anything from fiat currencies to precious metals.
They allow you to access and store your wealth that you might need in the short-term.
But that’s not all.
It’s no secret that banks will literary steal your money with negative interest rates. As if that’s not enough, higher inflation will slowly erode your purchasing power.
But with stable coins, you can earn investment type returns, on cash, just like in the good old days.
So, here is what you can do.
You can take your cash and convert it into a stable coin like PAX, USDT, or Dai. Then you put them up for a loan on a lending platform such as Cred or Blockfi. In return, they pay you interest.
It’s no different than what your banks do with your money. But instead of 0.1%, you get up to 10% annual interest.
7. Buy S&P 500 index
There are two most dependable hedges against inflation: gold and stocks.
During the most massive increase in the money supply in history, the S&P 500 index is arguably the safest bet on the planet.
It consists of the highest-caliber companies America has to offer, and these companies cannot be printed.
From this perspective, the S&P 500 is the very definition of inflation hedge.
8. Be patient
Unless you’re a swing trader, you shouldn’t watch prices every day.
If you don’t need the money in 2 weeks, there is no point in checking the prices daily.
What’s the point of watching the prices if you are not going to do anything about it?
As Warren Buffett said, “If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.”
So, if you have at least a 5-year investment horizon, corrections should be factored into your portfolio.
Anytime you do something, there is a risk. There’s a risk when you invest money, and there’s a risk when you don’t.
Nobody knows right now if the market is now going to go up, down, sideways, or in circles.
But there is simply too much money chasing a few assets, and it might be risky to stay in cash right now.
For better or worse, the market seems to agree with me, and the market is always right.