I always received question if we are heading to another financial crisis like 1998, 2008. The answer is certainly ‘Yes’, but we just don’t know when. It is a crisis if it hits us when we are not prepared and it happens out of our expectation. It is no surprise that people are worried about economic crisis as stock prices fall badly.
Shall we really wait for the crisis to happen to start investing or shall we start investing now? Then I would like to use an analogy. There are always potential deadly traffic accident on the road every day, do we avoid using road completely? The answer is ‘No’. Instead, while using the road, we take the necessary safety precaution, be responsible user, be alert to the road condition etc. Investing in stock market is similar to this analogy, instead of being fearful of crisis and stay away from investing, we educate ourselves, take necessary risk management, diversify, be knowledgeable, and learn from past failure, from other successful investors.
Whenever there is crisis, certainly there are plenty of bargain to be picked by investors. Every investor, whether experienced or not, hope for financial crisis. However, there is a great difference between the experienced and inexperienced investor when opportunities arise. When the crisis really hits, a seasoned investor will start bargain hunting, while an inexperienced investor will hope for the crisis to get worse until the opportunity is missed. End of the day, I opine to invest successfully, it is about the ability to navigate a market regardless of market condition rather than whether there is crisis or not.
For a seasoned investor, there are always investment opportunities regardless of market condition, it is only a matter of more or less opportunities. For an inexperienced investor, there are always reason for worry because market is never risk-free.
So what shall we do even if we are really heading for another financial crisis?
I always believe in risk management; diversification; and invest for cashflow (i.e.dividend) might be a good way to mitigate such risk. Always invest in good quality companies with good business management and giving consistently growing dividend . As to how to identify good strong business that gives sustainable good dividend? It really takes experience, business sense, skills and ability to spot in advance the strength/weakness/opportunities/threat of a business. These are paramount to pick the winners and navigate the rough market successfully.
If you would like to find out more how you could plan for your investment using stock as the asset class, and how to navigate the market successfully, please feel free to drop me a message at [email protected] for a non-obligatory discussion.
