What guiding principles should investors be leaning on now to make smart decisions?
This is a pivotal time. The wrong moves now will cost people 10 to 20 years of their lives in rebuilding. Others will seize this moment to get ahead and stay there for the long term.
Minimize Exposure to Losing Investments
The economy and all of our various markets will bounce back again. History shows us that they will eventually peak far above today’s levels.
However, while most investments will stutter and stall for a couple of months, some are clearly poised for deep, deep cuts. Some assets could easily dive by 70% from their peaks. Even if you think this crisis will only be as bad as 2008.
If you’ve been overpaying for investments, or are in hyper volatile investments in which prices are not supported by fundamentals, it is past time to restructure.
Most people are not strong enough to be transparent about the value of what they are selling. They are just looking out for number one. That includes many brokers. Yes, there are still great real estate investments. Though copying the one family who just bought 8 NYC condos at top of the market prices because they thought it was better than money in the bank, might not be the best move for everyone. Definitely not if you may need income or to cash out those investments in the next 7-15 years.
You may have missed the peak, but you can still exit losing investments before you lose even more. Losing 30% is a lot better than 70%.
There are still investment opportunities which are heavily weighted toward high rewards and low risk over the medium and long run, if you have the right connections.
For the last twelve years the theme of annual forecasts has been ‘uncertainty’. So, by now, you should be pretty comfortable investing in uncertain times.
The best medicine and hedge for this is to diversify.
NNG Capital Fund does this by diversifying into multiple real estate strategies and asset types in one fund, to future proof its investor clients’ portfolios.
Invest for Passive Income
Since most investors cannot gamble on appreciation in the current situation, they must invest for income. With all of the health concerns happening right now, passive income that can keep delivering if you are sick or can’t go to work has never been more important.
As Warren Buffett says, look at the value of the individual investment opportunity and asset.
There are going to be great and terrible real estate, mortgage note and business investments out there right now. Just saying “it’s a great time to buy real estate” would be totally irresponsible. Maybe even unethical. It’s all about how much you can buy it for, on what terms, and the real value potential.
Even if lockdowns and quarantines ended on May 1st, 2020 there is a high chance that even the best income investments could produce very lean yields for the next 6 to 18 months. Investors need to be comfortable with that. It is important to understand that what you do now in managing those assets will make all the difference in how quickly they begin performing on full cylinders again.
This is one of those moments in which the playing field is cleared out pretty quickly. Many will disappear in a matter of weeks. They lived in denial about the state of the market, market cycles and pricing for way too long. And that’s despite having access to more data than any investors ever before in history.
Whether it is getting investment advice or finding the right money managers, it is more important than ever to lean on those who have been through previous downturns.
You may not love your options. You may have fear. Still, the bottom line is that there are clearly some investments to pull back from right now, and other strategies to embrace. Failing to take this action now will impact you for the rest of your life. Just do it.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund