Humans have been fighting each other since their beginning it seems and it continues even today in 21st century. And it’s unlikely that conflicts will ever stop on a planet with limited resources. Even if you are living in a peaceful region, there is no guarantee that a war in the neighborhood won’t impact you. In today’s interconnected world, everyone is at risk.
It’s precisely what is happening during Russia-Ukraine conflict, when many countries globally are facing high inflation and rising fuel prices. Several countries have defaulted on their debt payments and others may face the same situation in future.
In these difficult times, it makes us wonder how we can protect our investments during a war. And where to invest during a war so that we can get good returns in future? Here are some tips, insights and suggestions that can help you make the right investment choices.
Large-cap stocks – Historical evidence shows that large companies can stay resilient even during times of war and conflict. They have vast resources to compensate for temporary reduction in sales, revenue and profits. Even during earlier wars like World War II, Vietnam, Korean war and Gulf conflict, large-cap stocks continued to deliver average returns of more than 11%. As such, investing in large-cap stocks can work during a war.
Rethink tech stocks – A war can limit spending on tech upgrades. This applies to most organizations including private players, government and other institutions. Adverse effect of war on tech stocks can be seen with tech-heavy Nasdaq 100 index that is down 20% YoY.
Gold and ETFs – If you are looking to cut down risks, it will be better to consider safer options like ETFs and gold. Make sure you have a diversified portfolio.
Avoid panic selling – In a war situation, some of your stocks may witness a rapid fall. However, you need not press the sell button. First try to find the real reasons behind the fall in valuation and then take a decision accordingly. Panic selling can make things even worse.
Buy when others are selling – This wisdom on investment does not change even during a war. Even though the situation may look quite bleak, things have always improved with time. No matter how bad a war or conflict might be, things get better eventually. So, a war may actually be a good time to invest in stocks that are currently available at relatively low prices.
Last but not least, create a surplus cash position. This will ensure that your daily needs won’t be impacted by rising prices or stock fluctuations. With a strong cash position, you can stay invested for longer.