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Your Wealth in Crisis: What To Do?

We wrote last week that the global financial markets were standing on the brink of a steep cliff, with the US economy staring at a possible default.

Anyways, while the US has averted a default (at least as of now), the markets indeed jumped off the cliff, with stocks in the US leading the free-fall.

In fact, this week was the worst for the US markets since the 2008 crisis. The Indian markets also had their worst week since the crisis. The Sensex fell by almost 900 points during the week, with almost 45% of these losses coming on Friday (5th August) alone.

Note: Country names represent their respective stock market indices; Source: Yahoo Finance

Yes, dear reader, this crisis is for real. We, at Safal Niveshak, have been wondering when the markets would wake up to the reality of the debt crisis in the western world.

Now is the time!

But the way stock markets are reacting, it seems like investors have finally woken up and realized the world economy has serious problems.

See, the stage for this turmoil was set during the financial crisis of 2008.

And we don’t believe it will be over anytime soon…at least not till the US and other western governments bring their houses to order.

Until that happens, we’ll be dealing with a world of far greater financial uncertainty.

Amidst this, your primary goal as an investor right now should be to simply retain your purchasing power.

But how you can do that?

Buy gold, some would advise. It’s a good bet but only for 10-15% of your portfolio.

Invest in hard commodities. Again a good (but a risky) option…but relevant only for another 10% of your portfolio.

What about bonds? Well, the Indian economy is heading for a slowdown and bond yields are not far from their peaks seen during the year.

This makes for a good case for buying bonds. But again, not more than 20-25% of your portfolio.

Remember, you still need to take care of a large part – almost 50% – of you investment portfolio to maintain your purchasing power.

Stocks? Yes and no!

Yes, for stocks of companies that have pricing power.

No, for stocks in general…simply because most companies out there don’t have any pricing power.

“But should I really be thinking about stocks now, when I should be selling whatever I have?”

This is a good question and I’m glad you asked it.

Look no further then then the last such period of high uncertainty, dear investor.

It was 2009…and the most amount of money people have made starting then has been in the stock markets.

I know it is tough to look at, or even talk about, investing in the stock markets in such terrifying times.

But if you read the financial history of the world, especially when the chips were down…like they were in January 2009…now is the time to pick up some good businesses in the stock markets to make a lot of good returns over the next few years.

Of course, we are not at the end of the crisis, and there’s a lot of bad news that is still going to spill out

But if you are able to find good stocks (again remember – stocks with pricing power!) at cheap valuations even now, start buying in bits and pieces.

There’s some seriously good money waiting to be made from good quality Indian stocks over the next 10-15 years.

You can start now!

Anyways, here’re some interesting posts that we published on Safal Niveshak this week.

Have a nice and safe weekend!

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.

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