Modern investors seek both safety and wealth preservation through resilient portfolio strategies; more often than not they consider ESG investments when selecting their portfolio investments.
Investors with knowledge of a building’s ability to adjust in a post-COVID world may be able to invest in redevelopment projects for maximum profit, though this will require extensive research and selection processes.
1. Diversification
“Don’t put all your eggs in one basket” is sound advice when it comes to investing, particularly during volatile market conditions. Diversification is a strategy designed to mitigate risk while growing wealth.
Diversification refers to spreading out your investments across various asset classes and within those assets, such as stocks, bonds, real estate and precious metals. You could diversify further by company size, industry and location – for instance owning stocks in large US companies as well as small US or foreign ones and holding various stocks from each.
Protecting your portfolio against certain forms of risk requires diversifying its investments so they aren’t all performing in tandem. For instance, if one stock outperforms others in your portfolio and surges, that outperformance may offset some losses elsewhere; or vice versa: when another investment declines in value it will help compensate.
Diversification can help mitigate risks, but it does not eliminate them completely; certain systematic risks are unavoidable no matter how diversified your portfolio may be – these could include inflation, interest rates or geopolitical events.
Additionally, each investment entails unique risks. For instance, should a CEO of an affected company die suddenly and drastically impact its stock prices; similarly new legislation can have more of an effect on certain industries than others – air travel for instance may be affected more severely than digital streaming platforms and as such investors looking for diversification may want to include investments in both.
Diversification also has costs. Diversifying among multiple asset classes may increase your total costs as you will incur transaction fees and brokerage charges from multiple assets classes; however, recent trends towards zero-commission trading of stocks and ETFs has helped minimize these fees. We recommend working with a financial professional to create a diversified portfolio tailored to your financial goals, risk tolerance, and time horizon.
2. Active Management
Active management refers to investing with funds managed by portfolio managers who strive to outperform a benchmark, such as a market index. They do this through investment research and stock selection – taking note of market trends, changes to economic indicators, shifts in political landscape, political turmoil and so forth – in order to make decisions regarding purchasing stocks considered undervalued or short selling others that they think may be overpriced.
Advocates of active management claim it can generate higher returns than passive portfolios that simply track an index. Furthermore, active investments provide access to sectors or regions not well represented in passive investments – although it may be challenging for active managers to consistently outshone them.
As such, it’s essential that you select a manager with an established record of outperforming their benchmark over multiple time periods. Furthermore, be wary of managers with high turnover rates as this could indicate they are purchasing and selling at inopportune moments.
At times of economic uncertainty, like during a pandemic like COVID-19 or when inflationary concerns increase and interest rates continue their upward climb, an active management strategy may help your portfolio navigate volatile markets more smoothly. Furthermore, finding an experienced active manager who has navigated their portfolio through similar circumstances may prove invaluable.
An active manager could take advantage of an opportunity presented by shares in online services companies which saw dramatic price declines at the onset of pandemic by shifting your investments away from them and investing more money into industries they believe will grow more quickly.
At Equity Edge, our focus has been on equity investments; however, an active management strategy can benefit investors across asset classes. Retirees may face particular difficulty from low interest rates and inflation pressures; an active manager who specializes in finding yield sources typically held by index funds can help maximize this situation while navigating mid-cycle fluctuations when stocks lag their typical growth rates.
3. ESG Investments
Crisis situations often inspire investors to reconsider values-based investing and seek investments that meet their ethical standards, such as environmental, social and governance (ESG) considerations which have increasingly become part of business practices.
Companies ranked highly on ESG factors are generally less risky, because they tend to avoid practices that could result in financial losses and damage their reputation, as well as policies and practices designed to safeguard employees and the community – such as limiting fossil fuel usage, minimizing greenhouse gas emissions or refraining from practices that harm the environment.
ESG can be a complex concept with differing standards, reporting requirements and methodologies; different investments may weight ESG factors differently or focus on specific criteria within one factor. Greenwashing occurs frequently where companies claim responsibility without acting accordingly – providing investors with inaccurate and misleading information while potentially restricting profits.
Companies that devastate natural environments like rivers and wetlands could face negative ESG ratings that compromise access to financing or even trading on stock exchanges. Since these ratings are determined based on information voluntarily disclosed and considered material to the business, it is wise to conduct your own due diligence prior to investing in any company’s practices.
Many companies have integrated ESG factors into their business plans and even provide impact reports detailing sustainable and cultural initiatives. While this approach provides a good starting point, it’s also crucial to keep traditional measures like revenue and net income in mind when looking at ESG performance.
Investors looking to incorporate ESG principles into their portfolio should search for mutual funds or exchange traded funds (ETFs) screened for ESG criteria, which take the guesswork out of stock selection and offer more diversified investments options. You may even find ESG funds dedicated to specific sectors like energy or real estate.
4. Real Estate
Real estate investments offer multiple avenues of returns in today’s post-Covid world. Investors have access to different types of real estate such as office buildings, retail spaces and industrial complexes that could yield significant dividends in terms of rental income and appreciation over time. Real estate has long been used by those looking for diversification of their portfolios as an effective asset class.
Residential real estate prices have reached historic lows. As such, residential real estate investments offer excellent yields to investors. There are various methods of investing in real estate such as flipping houses or purchasing homebuilder stocks from homebuilder stocks companies or investing through real estate investment trusts (REITs).
Commercial real estate investments offer another avenue of profit in the post-Covid world, as office space and logistics/shipping centers have seen increased demand thanks to online shopping. Investors seeking reliable returns may find great opportunities in these sectors of the market.
Multifamily properties were among the highest performing real estate investments during and after the pandemic, and are expected to remain attractive investments when the market recovers. Shelter needs were inelastic during the pandemic; therefore as population returns to pre-pandemic levels, demand for multifamily homes will likely remain steady.
Investors may find investment opportunities in hotel and resort properties. Leisure travel has experienced explosive growth since the pandemic hit, so investors may see hotel investments as a reliable source of income.
No matter the type of real estate investment you opt for, it’s essential to gain an in-depth knowledge of its underlying business dynamics. This is particularly important in the post-Covid environment where investors face new challenges and greater uncertainty; more precise data analysis may be necessary in identifying promising targets; to do this most effectively it would be prudent to partner with an experienced team of real estate investment professionals who can offer insight and guidance necessary for success in post-Covid markets.
