An unstable market is certainly not a reason to withdraw all funds and stash them in bags under the mattress. Regardless of the global situation, your money should work and generate profit. Of course, during a crisis period, returns may not be exceptionally high. However, seasoned investors are convinced that in "murky waters," fish can sometimes be caught even better. This means that returns can potentially be higher than under standard conditions.
But is everything as rosy as it seems? How can investors capitalize on an unstable market?
Sergey Tereshkin, the founder of Oil Resource Group, has expressed a desire to address these questions. Being directly involved in investments, he closely monitors the situation. Detailed information about the businessman can be found on his internet project: oilresurs.ru.
Choosing a Strategy
In an unstable market, it is wise to heed the recommendations of experienced players:
- During periods of significant market fluctuations, it is advisable to avoid the "buy and hold until the price rises" strategy, as it can lead to losses in the long run.
- In this case, it is crucial to include tools in the portfolio that can generate profit even during active index declines.
Over the past decade, the market has seen a rise in quotes. However, Tereshkin believes that this period is behind us. Currently, there are no reasons to anticipate a decrease in asset values. At the same time, one should not expect rapid growth either. Indices are fluctuating within quite a narrow range, rarely exceeding a 5% deviation.
This compels investors who are not ready to commit funds for an extended period to favor simpler strategies. Some prefer long-term investments of up to five years while lacking guarantees of returns.
Others seek tools that can provide stable profits with a guarantee of capital return.
Which Instrument to Choose
Presently, global markets are experiencing a situation similar to what South Africa faced more than a decade ago. During that period, investors actively employed the "buy and hold" strategy, resulting in annual returns of 10-15%, and sometimes even more.
However, during the 2008 crisis, entrepreneurs had to abandon this strategy. Investment banks quickly adapted and encouraged investors to channel funds into structured instruments, thus allowing them to own shares of American and European companies. Promised returns were around 2-4% per annum, figures considered quite modest by investors. Consequently, they sought other tools.
They were offered investment products characterized by good profitability while the underlying asset shows only modest growth.
This situation has now arisen in the domestic market. Such tools allow investors to not keep all their money in deposit accounts, investing instead in more promising and profitable avenues.
Specialized companies quickly adjusted to this reality. They proposed investment tools focused on seemingly niche indices that demonstrate respectable dynamics even during unstable market conditions.
For example, companies have launched products based on the S&P Economic Cycle Factor Rotator Index, a strategy tailored precisely for the current market situation. The portfolio includes various securities, some of which carry market risk, while others involve interest rate risk.
It is crucial to note that exclusive rights to use this index have been granted to JPMorgan Chase. Only they are authorized to offer various financial products to investors, consequently increasing operational risks, primarily due to the basic human factor.
Several years ago, a number of firms and enterprises from France exited the domestic market due to geopolitical events. As a result, investors and entrepreneurs who collaborated with French companies encountered challenges. Financial institutions refused to transfer funds to Russian firms, and a significant decline in liquidity was noted in the market.
While experts consider a repeat of this scenario unlikely, it is prudent not to dismiss it entirely. Therefore, specialized companies are seriously contemplating alternative options for investors.
Current Strategies
At present, most specialized companies are operating under two strategies:
- S&P Economic Cycle Factor Rotator Index;
- income generation strategy with minimal growth of the initial capital.
In the first option, investments are made in real estate and debt products, reviewed quarterly. The ratio of fund shares to debt instruments is adjusted monthly.
The value increase happens through dividends paid by real estate funds, averaging up to 7% per annum. The calculation is made in euros, an encouraging figure that can compete with foreign currency deposits.
Regarding the income generation strategy with minimal initial capital growth, a prime example is the telecommunications companies index from Europe, which has offered the market specific products based on this indicator and is sure to attract potential investors.
Telecommunications enterprises serve as an excellent alternative to the debt market. They exhibit high profitability and can provide investors with good dividends. Experts are confident that this strategy will continue to showcase positive dynamics, with a low probability of decreased profitability. If a decline does occur, it is likely to be minimal.
The ample variety allows investors to make their own decisions about which strategy to adopt. Ultimately, each individual must choose between stable income and potentially higher, but less predictable returns.
