Is it wise to invest during a crisis?

The world faces different types of crises from time to time. In some cases, the crisis could be a global crisis such as the recent COVID 19 (Corona Virus) pandemic outbreak while in other cases it might be a national crisis that is limited to a particular country alone such as a national recession. Many undesirable situations arise during a crisis. The economy of the country could be threatened, and the prices of goods could fall or increase, depending on the type of crisis. However, a crisis will almost always hurt the economy of the affected country and the nation’s stock market is likely to fall even to the extent of crashing. This article will discuss if it is wise to invest during a crisis.

Generally, it is wise to invest during a crisis due to some reasons. The reasons why it is wise to invest during a crisis are discussed subsequently.

Your money can buy more

When there is no crisis, companies that are doing well will have a particular stock market price and the same with those that are not. You could buy during this period, but you would be buying at a normal price. However, in the event of a crisis, their stock market price could fall depending on how much the economy was badly hit. You can be sure that the crisis will end at a particular point in time. When the crisis ends, companies that were doing well will pick up again, even if it takes some time. As they start to do well, their stock market price will return to normal and the implication will be that your money too will have added value. The difference here is that the amount that would have only bought you 500 units of shares when there was no crisis could have bought you between 800 to 1000 units of share during the crisis. However, before you invest in any trading platforms, you should read reviews about trading platforms to know which of them were profitable before the crisis to know which of them will find it easier to survive the crisis and go back to profitability after the crisis.

It could improve how quickly the crisis ends

One of the reasons why crisis periods are often harder on the economy of affected countries is due to panic. A lot of people withdraw money in huge quantities to either keep at home or to buy what they would need to survive during the period of the crisis. In some cases, they are advised to do so by the government, especially when there is the need to institute a lockdown of parts or all of the country. Thus, if it was an economic crisis, the country will find it harder recovering from the crisis because their citizens are hoarding money that the government could have utilized to get things to normal. However, if a significant number of people invest during a crisis, there would be money available to organizations and the government to carry out activities to solve the crisis. With the right amount of money and the right policies, the crisis would be over within a short time. Immediately the crisis is over, the value you invested would have added value as things normalize and then would continue to add value over time.

How Your Business Can Survive The Corona Crisis

Most business owners get so pre-occupied by the here and now that they forget the future. However, disaster can strike at any time. The list of potential crisis events seems endless, from hurricanes and earthquakes to terrorist attacks and pandemics. Fraud and intentional sabotage within your office can also manifest into a full-blown crisis.

Crisis situations may come in different ways, but they all have the ability to cause significant financial damage. Even if your account recovers, your brand image could take years to rebuild.

Luckily, you can give your business a much better chance at survival with the tips below.

1.      Solidify liquidity

Access to cash is one of the major challenges that small businesses face. Studies show that only about half of new enterprises last longer than five years. Fixed costs like rent, payroll and utilities often leave little liquid cash to owners. So, when a crisis hits and revenue takes a slump, entrepreneurs usually end up devastated.

To prepare for this short-term challenge, aim to have a plan to gain immediate liquidity on standby. The cash you unlock must be enough to cater for your short-term debt obligations for a while without any sales revenue.

Once your cash reserves are guaranteed, turn your attention to day-to-day cash flow. Renegotiate terms of contracts like rent and loan payments.

Another solid strategy for increasing cash flow is to prioritize your customer experience. Eliminating any friction in the payment acceptance process, for instance, can minimize the rate of shopping cart abandonment and promote customer retention. As a retail merchant services review explains, a proper merchant account provider can help its clients to achieve and sustain cash flow.

2.      Look for capital

To effectively wade through a crisis, you must do more than just guarantee liquidity. When disaster hits, demand goes down and paid leave becomes a reality. Even if you have a good amount of cash in the bank, you will still need a way out for when it runs out.

Thankfully, the government often launches relief plans tailored to small businesses, so that they can make payroll and cover expenses. In the private sector, large companies tend to offer grants and interest-free loans as aid packages. Applying for these solutions rather than normal loans can help you sustain your business without incurring heavy damage when the crisis ends.

3.      Engage policymakers

In times of crisis, policies change, and proposals to aid one sector or the other start floating in government chambers. As a small business owner, you may feel out of reach working from your town far away from the capital.

Nevertheless, it is crucial that you try your best to make your voice heard. Mediums of engagement are endless, from social media and emails to phone calls and letters. You can also partner with other entrepreneurs to make a more powerful entity that speaks of small businesses as the lifeblood of the community. Remember, the wrong legislation will hit you too.

You will survive

Making a business 100 percent recession-proof is impossible. However, implementing the right practices will give you the best chance of survival. Accessing capital and maintaining liquidity are the most important steps for enduring a crisis. Since you need help to achieve both, you must do as much as you can to get yourself heard by the legislators that hold the key to your economic future.

Author Bio: Payment industry guru Taylor Cole is a passionate payments expert who understands the complex world of merchant accounts. He also writes non-fiction, on subjects ranging from personal finance to stocks to cryptopay. He enjoys eating pie on his backyard porch, as should all right-thinking people.