Secret Sauce to Stay Ahead of the Curve
“Every day is a new day. It is better to be lucky. But I would rather be exact. Then when luck comes you are ready.”
― Ernest Hemingway, ‘The Old Man and the Sea’
Transform questions into guidelines. Three essential considerations include:
What am I investing in and will it survive recession?
How does it make money and how sustainable is it?
Am I putting all eggs in one basket?
Our focus is on Real Assets, Stable Income, and Risk Diversification. We'll elaborate on why these factors are crucial to consider.
Risk Diversification:
Investors should diversify their portfolios across various countries, currency, and asset types. There's no single correct approach to asset allocation. It's wise for investors to choose investments they understand well. For example, invest in stocks that resonate with you and you're willing to review their financial statements. For treasury bonds, opt for countries where you have insight into the geopolitical climate and currency volatility. If investing in real estate, thorough research on associated risks, market conditions, and exit strategies is essential. Diversification isn't just about avoiding putting all your eggs in one basket. It's also about understanding the nature of the baskets you choose to invest in.
Steady Cash Flow:
In the future, the landscape for high-growth stocks may undergo significant changes as 'easy' money decreases. Investors are expected to prioritize a deep understanding of the stability of their investments. Like how these investments generate revenue, manage expenses, and the scalability of their business models. This shift in focus aims to ensure that investments provide consistent cash flow rather than act as a financial black hole.
Real Assets:
Years of loose monetary policy have resulted in numerous asset bubbles. For investors to protect capital, they must ask critical questions such as: What exactly am I investing in? How does the business model make money? How sustainable is this model? Companies that fail to answer these questions or demonstrate their use case will struggle to attract investors. Understanding the linkage between money and assets is essential. For instance, should investors clarify whether they are investing in companies through stocks? Or through layers of derivatives, which even financial advisors find it difficult to explain?
Here are some tips to navigate uncertainty in a riskier economic environment. Get a clear understanding of your investments, and how they generate revenue consistently. Apply this mindset and invest across various types of investments to diversify your risk. These approaches can improve your chance of success during an economic downturn. In our upcoming blog post, MoreHarvest will use Japanese real estate investing as an example. Demonstrate how this approach can kill multiple birds with one stone.
“Feeling my way through the darkness
Guided by a beating heart
I can't tell where the journey will end
But I know where to start”
Avicci, ‘Wake me up’
