What are the Best Investment Vehicles during Economic Uncertainty?

by | Apr 13, 2022 | BAM Blog, Multifamily Syndication, Real Estate Investing | 0 comments

In times of economic uncertainty, investors need to plan their investments even more strategically than usual. Financial planning and wealth management are necessary during these economic downturns because they allow investors to maintain control over their personal finance.

Even well-informed investors may get confused over things like global recession, financial crisis, trade imbalances, and how these things can affect investment markets and stock funds. Investing on its own already comes with a number of risks but, this is increased during pandemics, wars, recessions, etc. These negative occurrences can lead to market volatility. Investors do not want to lose money so they need to make smarter investment decisions during these times. [1]

Investors need to be cautious and vigilant when investing during a recession. They need to monitor the market so they can make good decisions and start investing in the right asset classes. They may be able to pick up some high quality assets at discounted rates. Investors may be able to find some great investment opportunities during this time. [2]

Some investors move their money out of equities into safer asset classes like government bonds, precious metals, and money market funds to act as a safety net or emergency fund to keep their money safe.

This, however, causes the stock market to depreciate. This means that economic uncertainty has both micro and macro level effects. Economic uncertainties affect companies, individuals, and the overall economy. [1]

As an investor, you need to be able to adjust your marketing strategy when recession hits. In order to help you build your financial plan, we are going to discuss some of the best investments during economic uncertainty. This will help you reach your financial goals and land yourself in a better position even if the economy encounters some bad news.

Investing During Economic Uncertainty

One of the best pieces of investment advice for investing during economic uncertainty is to diversify your investments. A diversified portfolio can help prevent significant losses during economic downturns if one area of your portfolio takes a serious hit. This is why diversification is such a key investment strategy during a recession.

During a recession, assets that are highly-leveraged, speculative, and cyclical are exposed to more risk. On the other hand, assets with low debt and good cash flow do well during difficult economic times. [2]

There is always a level of uncertainty every time you invest in something—no matter what it is. This is regardless of financial markets and the state of the economy. But new threats, such as recession or war, can create even more uncertainty that can impact future results.

Uncertainty refers to the inability to predict future earnings due to various economic factors. For example, it is impossible for people, even a certified financial planner, to predict when a recession is going to start or end. [1]

When companies predict sales and production trends, they use normal market sentiment. But with increased uncertainty levels, these numbers can become significantly inaccurate.

Micro and Macro Risks of Economic Uncertainty

Uncertainty causes an economic slowdown on both the micro and macro levels. Individual investors and companies are affected by threats such as recession and war, and this is the micro level effect of uncertainty. Uncertainty can also have a macro level impact on the overall economy. [1]

On a micro level, an uncertain economy is a major concern for companies that produce goods on a daily basis. Consumers may stop purchasing certain goods because of the economy, which means only the staples are completely safe from the effects of recession. Non-essentials, on the other hand, such as new cars and gadgets may suffer in terms of sales. [1]

The macro level effects of uncertainty may also impact investors. For example, when a country faces the threat of recession or war, larger investors may attempt to move their assets away from these unstable economies.

Financial Planning: Opportunities during Uncertainty

Investors will sometimes reduce their individual stocks to other asset classes to prevent any losses. But aside from protecting your assets during economic crises, you may also look for smart investment opportunities.

In terms of equities, health care and consumer staples can remain stable even during economic downturns because they necessitate spending no matter what the economy looks like. This means these sectors can perform well during uncertainty. [3]

Investors can also turn to fixed income investments and alternative investments to diversify their portfolio.

Investing in metals, crops, and other tangible goods can be a good way to diversify your investment portfolio. Precious metals can serve as a solid investment during economic uncertainty because their prices may increase during these times. An example would be when gold prices jumped 50.6% between September 2010 and September 2011. However, not all tangible goods do well during recessions. Some may drop in price during economic downturns. For instance, crude oil dropped from $133.88 to $39.09 in 2008. [3]

Some investors try cryptocurrency. Although crypto has not experienced a traditional economic recession due to its short existence, bitcoin is naturally diversified. It is not tied to any single country’s economy because it represents wealth across all borders.

Investing Strategies for Uncertain Times

Investors need to be prepared for times of increased uncertainty. Being well-informed by keeping up to date on local and world news is the best defense for investors. This will allow you to keep up with the stock market and even identify the best investments, whether it is in real estate properties such as multifamily housing or hedge funds. This will also help investors identify which sectors can gain more or lose in an economic crisis, allowing them to build a solid long-term strategy. [1]

Investors may even take advantage of economic uncertainty by analyzing most sectors and recognizing ideal investment opportunities. They position themselves in a way that will give them the most benefit when the economy begins to reverse. They may keep up with the news to adjust their portfolio accordingly so they can make the most profit even during uncertain times. They may even keep track of consumer demand and use that as a basis for their investments.

This type of investor will put money into recession-resistant industries. These are industries that perform well even during economic downturns, usually because of consistent consumer demand. These consumer staples increase in value during recessions. Their stocks therefore increase in value. This usually includes grocery stores, alcohol manufacturers, discount stores, cosmetics, and funeral services. [2]

However, some investors are more content with leaving their money where it is and keeping it safe during times of economic turmoil. Mitigating risk is their number one priority. Both are viable strategies when it comes to investing in an economic crisis.

What is Multifamily Syndication?

A lot of investors turn to real estate investing during economic uncertainty because this asset class is very reliable. Even during a recession, people need a place to live. This means apartment buildings and condominiums still generate a consistent cash flow even during uncertain times.

Real estate investing is also a good way to diversify your investment portfolio.

A multifamily syndication is one way for investors to get into real estate investing without taking on any of the usual responsibilities associated with owning and running a multifamily property.

When multiple investors pool their resources together to purchase a single real estate asset, this is called a syndication deal. While this can be done with any type of real estate property, multifamily syndication is the most popular because of its strong and reliable cash flow. [4]

Unlike single family properties, multifamily properties do not have to worry as much about vacancies. Even if one or two units become vacant, the remaining units can still generate income.

In a syndication deal, a primary sponsor or syndicator puts everything together. They look for the investment property, they secure the loan, and then look for passive investors who will participate in the syndication. Once the deal is put together, the syndicator also manages the property. This means the passive investors do not have to manage the property, deal with tenants, handle emergencies, or have any of the responsibilities of a landlord. [4]

Passive investors can join and supply a portion of the capital needed to acquire the property. They then earn money from the monthly cash flow as well as the equity upon resale.

For investors who want to diversify their portfolio and stay safe from economic uncertainty, multifamily syndication is the right choice for you—and BAM Capital is the best syndicator for the job.

BAM Capital is an Indianapolis-based syndicator with a strong Midwest focus. This syndicator prioritizes B++, A-, and A+ multifamily assets with in-place cash flow and proven upside potential. [5]

With its unmatched real estate expertise and transparency, BAM Capital mitigates investor risk and creates forced appreciation to yield a higher return. BAM Capital locates high-quality real estate opportunities and negotiates the purchasing and financing on your behalf. They take care of everything from start to finish, making it a true passive investment.

BAM Capital has a consistent track record that makes them very popular among passive investors. In fact, they currently have over $700M AUM and 5,000+ units. Schedule a call with BAM Capital and invest today.