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Is it still worth to invest in a credit crunch?

If you are one of those investors who get scared when things go ugly, of course the answer is not. After all, seeing the banks shares crushing, the prices of raw materials going up and making 50% of some sectors’ companies going bankrupt and the job cuts in the US, all this gets kind of scary.

 But this is only one side of the story. When the market plunges, it also means that the yo-yo will reverse sometimes and the shares will also go up. People will want to have their own houses, and if they cannot afford to do it today, they will come back to the idea in several years.

As has said more than once, the market plunge means also opportunities for the daring investors. A crisis means that many companies have to sell some of their assets/investments in order to get cash for survival. And when everybody sells the same type of asset, you can bet that the prices are lower. This is how the sovereign funds of the Arabic Peninsula, Russia or Singapore are now purchasing lots of assets – because the prices are low and because they have cash. And, above all, because they know that the prices of the assets they buy will go up once more in the future.

As usually, we at are asking ourselves – how can a common investor take advantage of the current market plunge? It’s easy. It requires though some stomach for risks and some careful calculations, of course.

First of all, a shrewed investor should have cash available for these opportunities (which are on the market very shortly, before the selling companies either go bankrupt or come back to prosperity once again). If you do not have the cash available, you might consider selling some of your over-priced investments to get it (e.g. the shares which are over-valued, the properties which have not fallen in value but they will also not grow signifficantly in the future etc).

 Secondly, bargain hunting means looking for opportunities. Not all the bargains are worth, of course, and many companies will go bankrupt in the sector, many properties will recover very hard etc. However, real estate is real estate and it will probably go back on its value – provided that you can wait for more than one year, since the recovery after such a crisis is slow. So go out in your neighbourhood and look for some worthy investments which will grow in the future – you know better than anybody (and of course better than the omniscient site 🙂 ) what are those worthy investing opportunities.

So our advice is – don’t be shy and take advantage of the recession! Go and get that money-making opportunity!

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