This article was firstly published on comparehero.my
The real truth: there’s no clean cut yes or no answer, as it’s a case by case situation depending on a person’s level of income, financial standing and background, type of investment and their risk appetite.
But during a recession, stock prices typically plummet, especially if they are part of recently hard-hit industries like travel, leisure, airline etc., opening up opportunities for the masses to pick up high-quality assets at discounted prices.
This presents the rare opportunity for investors to buy stocks for a much more affordable price. Phang Kar Yew, Executive Director and Co-Founder of Harveston Financial Group, echoed this point. He told CompareHero.my that investors should “never waste a good crisis,” because there will be opportunities in the market during a recession, depending on an investor’s level of perseverance, the risks, and how they welcome the opportunity.
For example, Phang said an investor looking to make a short-term return can take advantage of currently strong performing stocks like gloves – as long as the investor has some spare, non-emergency, cash on hand. The money, he said, has to be a dedicated amount that isn’t parked under any other commitments.
“During a recession, things are cheaper and companies are not sure of their pricing, so if you can hold your investment horizon longer, you may take up more risks. Equity will definitely pay more handsomely and provide better yield than fixed incomes or bonds in the shorter-term. But you have to match it with your objective and review every year or half-a-year to see if the market has turned around or is volatile. From there, readjust and rebalance the profile accordingly, “ Phang said .
However, he wanted to emphasize that the decision and desire to invest shouldn’t just depend on the timeline or the performance of the market, because investing is not just about beating the market, but it’s mainly about achieving some form of personal or financial goal.
“We don’t invest because there is a recession or no recession. In investment, what we like to advocate on is to have a real clear goal and objective,” Phang said. “There is nothing better than defining what you want to achieve on the long term, mid term and short term.”
With a very clear objective, then only will you be able to decide if it’s the right time to invest. It’s not so much on the external environment – yes, it does have a bit of implication, but it’s more about the inner self and the willingness to answer the question ‘why do we want to invest?’.” he added.