There are signs of economic revival in many parts of the globe but it cannot be denied that the negative impact of the COVID-19 pandemic will be felt for many months to come, if not for a few more years. This is a time for people to take stock of their financial readiness in the face of many economic uncertainties. How about you? Do you have financial resilience to weather the storm and wait for better days?
When the Stocks Are Down
The ongoing pandemic has sent stock markets around the world on a tailspin even as the global economy fell to a grinding halt. Businesses had to shut down, bankruptcies were filed, millions of workers were laid off, and hope was growing thin for many people who were not prepared for a financial meltdown. The domino effect reached many large corporations and smaller companies.
There was also a spike in the number of lawsuits and the demand for licensed process servers grew. Incidences of loan defaults and breach of contracts in many industries were increasing, forcing people to sue in court to recover their investments or to obtain payment for goods delivered and services already rendered. For many people, it really became quite messy as bills mounted and job opportunities began to melt.
When Warren Waits
The world’s most brilliant investor, Warren Buffet, also became inactive. People were asking, “Is this the calm before the storm?” When the Oracle of Omaha stops buying stocks and he seems to be waiting for things to settle down, investors around the world take a pause to ask why. While Buffet always preached about buying stocks during a crisis since they will be available at bargain rates, he did not take positions last March when the COVID-19 pandemic began to really make an impact on the global economy.
Instead, the 90-year old chairman of Berkshire Hathaway sold his stocks in banks and airlines. It turned out that his timing was right because today, the banking and airline industries are suffering financially. Most of the international airlines have had to ground their fleet. Others drastically reduced their flights to a minimum, but even these runs are not producing profit for the company but were made necessary to transport people who earlier got trapped by the pandemic-related lockdowns and travel bans. Airport management companies in Europe expected to lose at least $15.4 billion in revenue as the number of passengers dropped by 28 percent.
Calculate the Risks
But surely, all is not lost. Like how Warren Buffet chooses his stocks, there is a time to wait and a time to take action. In the middle of that, one needs to calculate the risks. All good businessmen and women, and all good investors share the same trait: they make calculated risks. As they say, those who risk nothing, gain nothing.
In any business environment or investment climate, it is always wise to know exactly where one stands financially. Aside from knowing one’s personal net worth by keeping an updated balance sheet, it is wise to have a clear grasp of cash inflow and outflow which enables an individual to calibrate how much to spend, save, and invest. It also helps a person evaluate his viability for taking out a loan to finance a new venture. In taking an investment position, a conservative approach is to only invest what one can afford to lose especially in volatile markets.
Keep Looking for Opportunities
It is also advisable to keep looking for opportunities even when the markets are down and the economy is sluggish. Always be inquisitive and be open to new information. For example, in 2015, nobody knew what Shopify was and why people should invest in it. Those who took a risk by investing $6,000 during Shopify’s initial public offering (IPO) now enjoy their stocks which are presently valued at $225,000 in terms of investment returns. Back in 2002, only a few understood what video streaming services were. When Netflix had an IPO that year, those who took a risk put down $6,000 of their money. Today, their investment is worth at least $2.4 million.
While the world waits for a truly effective and safe vaccine for COVID-19, there will still be apprehensions in the business community and other sectors of society. After all, there is no sense in making money and choosing investments if there is too high a risk on one’s health and safety. Again, what is needed is to take calculated risks especially during a public health crisis.
What is needed now is for people to keep mentally strong and emotionally stable. One can only make calculations and make decisions on personal business and finance if there is stability. People need to take time to exercise, eat healthy food, and get enough rest and sleep. By taking care of one’s health, planning and taking action to advance towards financial or business goals is much easier and has higher rates of success. Therefore, everybody needs to hang on, use strategies to survive, and prepare to thrive in business and finance because better days are sure to come.