The objective of today’s post is simple, as its title indicates, we are going to see how to make money with the Coronavirus crisis. For all those who have a tendency to be offended, I know that it doesn’t sound good at all to make money out of misfortunes, but the solution to eradicate this virus is not in my hands. The most I can do is comply with the prohibition not to leave home so as not to aggravate the situation, and I am doing it. That said, we must be aware that it is something that can harm or benefit our investments, so I have no ethical dilemma in trying to address this issue from an economic point of view. So, let’s try to save our finances.
First of all, it is important to highlight that nobody knows how things are going to turn out. Whether this crisis is going to subside next week, next month, or next year. Hence, there are two opposing views:
1. The Optimistic View
A cure is going to be discovered or the virus will simply disappear in the summer.
2. The Pessimistic View
The virus recreates itself and the situation we are in will continue for over a year.
Investment opportunities differ significantly depending on which view you follow. On the short term, I imagine there will be a thousand ways to take advantage of this situation: buy liters of disinfectant alcohol in bulk and sell it online, import medical masks and sell them on Instagram, trade in companies in the face of rumors of the creation of a vaccine to the Covid-19… Unfortunately, the option that I will propose here today is much more boring:
Create a long-term investment portfolio!
Yes, I’m sorry. The title promised to be much more interesting, but it is what it is.
Ok, for those of you who want to keep on reading beyond this point, here is what I have to say…
In order to explain how you are supposed to create a long-term investment portfolio and make money from it, we will need to classify investments into three categories:
1. Growth Companies
Companies that are expected to grow amidst this crisis such as pharmaceutical and IT companies such as Alphabet, Facebook, and Zoom.
2. Wounded but not Dead Companies
Companies that have been impacted but are expected to come back strong once this crisis subsides. For instance, who would invest in Ryanair with how bad the airline sector is now that flights have been paralyzed globally?
Who would invest in oil with the current oil crisis and the price of crude oil plummeting?
Who would invest in a cruise company now that everyone is canceling their trips and no new hires are anticipated in this scenario?
Well, this is what I mean by “Wounded but not Dead Companies”. Something that nobody wants today but years from now, when we see it in retrospect, we realize that there is no evil that lasts forever.
3. Safe havens
Finally, to give a little balance, also invest in gold (of course) and stable companies that have not been affected much by this crisis such as: Disney, Altria, and Netflix.
Depending on your risk appetite, you can spread your investment among these three categories. A risk averse investor would put a bigger percentage of his funds in gold, whereas those with higher risk tolerance would put a bigger percentage of their investment in the other two categories.
With this clear, all that remains is to prepare our shopping list and establish prices at which you would be happy with the acquisition.