It is definitely a risky environment to invest your capital. The fear of coronavirus spread has already impacted business earnings. Given China’s economy has quite a strong influence in the most populated part of the globe, it is a fearful time for everyone. This will ultimately impact the capital flows being distributed to the most productive parts of the economy of the world; hence, the expected return on equity will be hit the hardest.
If you would like to put your investment in a relatively less risky asset, gold is everyone’s favorite. Personally, I don’t like the most gold-related investments out there due to most of them not paying any dividends. (like Ticker: GORO) Gold is a safe haven but only when people start looking for safe haven. Hence, it is hard to pinpoint when investors will start/stop looking for one. I recommend an alternative solution, real estate, especially REITs.
Due to its structure, REITs have to distribute the majority (90% or more) of its net earnings, a.k.a profit, to the shareholders. Hence, REITs that have their core business in assets that can generate constant earnings with commitment (lease), such as; senior care housing (like Ticker: SBRA), apartments, or even office space. It is also important to understand their operating cost given the dividend is only paid out after these expenses.
Another good investments could be online shopping/delivery companies. Since countries are advising residents to stay away from public gatherings, this could give a small surge of online shopping. However, because purchasing power of consumers are effected, it will require further analysis of the relationship between these two forces.
If you would like to use your investment in a more generous and helpful way, you may also choose companies that supply the necessary tools to combat this virus. This is what sustainable or ESG investment offer. If enough investors share the same idea, investors could see their return grow with the help of other people’s interests, which could translate to capital gain, or even with dividends, due to government spending to combat the spread. But the ultimate impact is that capital is being distributed to the most important global issue at the time.
Besides consumer goods companies, it would be safe to stay away from companies that are associated with travel, countries that has relatively large current account deficits.
Unfortunately nearly every company’s earnings depend on consumers spending, this spread of coronavirus is truly troubling when thinking about its impact on global economy. The longer this fear stays upon public, the damage to the world market could grow with exponantioal factor.
Though fear could serve its purpose when protecting one’s health, it is often dangerous for a long term investor.
