Have you ever wondered how, during major market crashes, there were investments funds that became absolute millionaires? The financial markets are going through one of the most difficult times so far, with the sharpest decline since the financial crisis in 2007-2008. Just as you make money when you invest in a bull market, you can make money in a bear market.
In this article, I will show you what options there are to make significant gains and 10x your investments In 2022. Let’s get started!
1. INDEX FUNDS
Firstly, we have Index Funds. Now I know a lot of you will be thinking “What are index funds? I don’t really understand them” and that’s okay. Index funds are actually a really simple concept, they’re just a collection of investments put together in a specific way to track a certain market index. See it like a basket, if you will.
You have different investments, or let’s say fruits, in this basket and each one of these fruits represents a company in the index that the fund is tracking. For example, the S&P 500 tracks the 500 largest companies by market value in the US stock market. So, when you invest in an S&P 500 index fund, you’re actually investing in all 500 of those companies at the same time.
The great thing about index funds is that they offer the diversification, which is always important when it comes to investing. By owning a bunch of different investments within one fund, you’re automatically spreading out your risk. And because index funds track a specific market index, they tend to be pretty low-cost as well.
These investments have historically always been a great way to make money, but what about during market crashes? Index funds are still a fantastic investment during bear markets for a few reasons.
Firstly, because you’re automatically diversified, your risk is already spread out. And secondly, because index funds are generally low-cost, you don’t have to worry about high management fees eating into your returns.
Besides mutual funds, you can also invest in…. Secondly, we have Bonds. Bonds are essentially IOUs. When a company or government needs to raise money, they’ll issue bonds to investors and promise to pay them back over time with interest. There are all sorts of different types of bonds out there, but the two main types are corporate bonds and government bonds.
Corporate bonds are issued by companies, while government bonds are issued…you guessed it…by governments! Generally speaking, government bonds tend to be less risky than corporate bonds because governments can print money if they need to, whereas companies can’t. But that doesn’t mean that government bonds are risk-free.
In fact, government bond prices can still go down during market crashes. The reason for this is that when investors get worried about the economy, they tend to sell off their stocks and move into cash or other safe-haven investments like gold. And because government bonds are seen as being just as risky as stocks, they can get caught up in this selling pressure as well.
So, while government bonds may not be as risky as stocks, they’re still not immune to market crashes. Surprisingly, though, corporate bonds tend to hold up pretty well during market crashes. The reason for this is that when investors sell off their stocks, they often look for other investments that will pay them a decent income.
And with interest rates on government bonds being so low at the moment, corporate bonds are looking pretty attractive. So, despite the current inflationary environment, corporate bonds are actually a pretty safe investment right now.
The third Asset is Gold. Gold is often seen as a safe-haven investment because it tends to do well when the stock market is crashing. The reason for this is that gold is seen as a store of value and investors tend to flock to it during times of economic uncertainty. Not only that but gold is also used by central banks all over the world to diversify their foreign currency reserves.
In other words, gold is seen as being just as safe as cash…if not safer. And because of this, the price of gold often goes up when the stock market crashes. The biggest advantage that this type of value product offers you is that your money does not depreciate as much as with a stock.
Currently, from the peak to today’s prices, the markets have fallen almost 25%, while value products such as gold have fallen 12%, that is, half as much. Now, I’m not saying that you should invest all your money in gold. However, having a small allocation to gold in your portfolio is a good idea given the current bear cycle.
4. REAL ESTATE
Next up we have Real Estate. Yes, it is still possible to make money from real estate during a market crash. The reason for this is that real estate is a physical asset and, as such, it’s not subject to the same kind of volatility as stocks. In other words, you’re not going to see the same kind of price swings in the real estate market that you see in the stock market.
Furthermore, real estate tends to do well when inflation is rising because it’s a physical asset and its value goes up along with inflation. Of course, there are some risks associated with investing in real estate. For one thing, it can be difficult to find good deals on properties during a market crash. And secondly, if you’re not careful, you could end up with a property that’s worth less than you paid for it.
But, here are 3 reasons why real estate can be a great investment in 2022; Firstly, you have access to leverage in form of bank loans. This means you can buy a property with less money down, which gives you more upside potential. Also, it means you can repay the loans with ease over time.
For example, if you purchase real estate with a bank loan to be repaid in the next 10 years, then it would be easier to repay the loan as you compound your earnings-thanks to inflation!
Secondly, real estate is a physical asset that you can touch and feel. This makes it easier to do things like renovation which can increase the value of the house. And lastly, real estate has the potential to generate a steady stream of income in the form of rent payments. So, if you’re looking for an investment that will offer you some stability during a market crash, then the real estate could be the right choice for you.
The Fifth and Final Asset is Stocks. Yes, you can still make money from stocks during a market crash. The reason for this is that, although the stock market may fall in value, individual stocks may not. In other words, a stock market crash is not the same thing as a stock market correction. A stock market correction is when the overall market falls by 10% or more.
A stock market crash is when the overall market falls by 20% or more. So, while it’s true that the stock market as a whole may fall during a crash, there will still be individual stocks that go up in value. The key to making money from stocks during a market crash is to find those stocks that are resilient to downturns and invest in them.
Here are 3 tips to help you find those stocks:
1. Look for companies with strong fundamentals. When the stock market is crashing, it’s important to look for companies that have strong fundamentals. These are the companies that are best positioned to weather a downturn.
So, how do you identify a company with strong fundamentals? There are a few things you can look at, but two of the most important indicators are earnings and cash flow. Companies with strong earnings and cash flow are usually the ones that outperform during a market crash.
2. Look for companies with high dividend yields. Another thing to look for when searching for resilient stocks is a high dividend yield. Dividend stocks tend to do well during market crashes because investors are looking for companies that can provide them with a steady stream of income.
And, since dividend stocks are usually less volatile than the overall market, they tend to hold up better during corrections and crashes. To find dividend stocks, you can use a tool like a Dividend Screener.
3. Look for companies with low valuations. One final thing to look for when searching for resilient stocks is a low valuation. Companies with low valuations tend to do well during market corrections and crashes because they offer investors a margin of safety.
A margin of safety is the difference between a stock’s price and its intrinsic value. For example, let’s say a company is trading at $100 per share, but its intrinsic value is $120 per share. In this case, there would be a 20% margin of safety. The larger the margin of safety, the less downside risk there is. Overall, these investments can help you compound your capital and make more gains even in bear cycles.
Disclaimer: Please keep in mind that I am not a financial advisor. I’m only sharing my personal experience and thoughts. All strategies, tips, suggestions, and recommendations shared are solely for the purpose of entertainment and education. Investing comes with some financial risks. You must conduct your own research and due diligence, and if necessary, seek the advice of a licensed advisor.