In just a few months, the expansion of COVID-19 has put investors and entrepreneurs around the world against the ropes. In crises, however, opportunities are also generated. Today more than ever, a strategy must be put forward to invest in a step-by-step and safe manner. The current market situation in the economic crisis of the coronavirus causes investors to seek refuge assets or sectors that give them profitability, even in the long term. Randall Castillo Ortega, an entrepreneur and the founder of RACO Investment, provides insight into how to settle on investments in the current coronavirus environment.
Businesses already consolidated and tested are becoming a safe and low-cost bet in pandemic times; it’s about franchises. Today, with the arrival of COVID-19, franchise owners have been able to boost their businesses and project large returns. “Many branches are going to be put up for sale for different reasons. This is going to open the door to buy at very favorable prices. Commercial premises with lower rental costs can be purchased and there will also be many tax incentives, an accelerated recovery of the economy will come. Investing or establishing a franchise in the United States is not only possible today, but profitable, for Colombians looking to invest,” says Castillo.
An investor’s assets always have to maintain a diversified position. The most important thing is not to concentrate all capital on instruments that involve risk, but also to invest in stable elements that achieve a balance between gains and losses. In the face of economic volatility in times of coronavirus and variables in each sector, an investment portfolio should be a tool that compensates for any drops caused by the movement of markets.
Currencies such as the US dollar have been considered traditional refuge assets in times of financial turbulence. It is the main reserve and reference currency globally. While it is difficult to establish shelter assets in a situation like this, the US dollar strengthened after Federal Reserve Chairman Jerome Powell rejected the idea of using negative interest rates in the United States and warning that the recovery of the U.S. economy will be slow. If investors foresee a recession, they will buy dollars, even though there are other financial instruments with higher relative yields. In times of uncertainty, many prefer capital security more than a higher rate of return on an investment that may have more risks. “The world is very large and there are multiple investment opportunities. A safe bet right now is to invest in dollars. There is ease of access to credits, with highly competitive rates for foreign nationals, who can also take advantage of tax incentives. This is a non-economic health emergency,” adds Castillo.
Private equity is one of the most booming forms of investment in recent years around the world. This collective investment model, widely known and consolidated in developed countries such as the United States, is now open to investors in Latin American countries. They are capital investments in companies that are not listed on the stock exchange, managed by a professional team, whose main objective is to provide a medium or long-term return to their investors. In times of crisis, this strategy has been shown to thrive during volatile cycles as solution-based flexible capital, driven by investors who need liquidity or require rebalance portfolios and are forced to sell assets, generating greater discounts for investors with liquidity.
Buy stocks on leave and then sell. While the first recommendation is not to get carried away by stock panic, you can detect the sectors and stocks in decline from the coronavirus crisis, which have the potential to recover big when the pandemic passes. A rebound in the markets is very possible with the emergence of an effective coronavirus vaccine.