How to Manage Your Investments During a Crisis

Archive note: I originally wrote this article during the 2020 COVID-19 market shock. I have restored it because the framework around liquidity, diversification, and avoiding emotional decisions remains useful. Platform examples and market references below are historical, so check current conditions before acting.

The COVID-19 crisis is upon us, and it has great repercussions on the global economy, and I know a lot of you are wondering how to invest at the moment in those troubled times. That's why I really wanted to make an article where I share what I do myself about my investments during those times of crisis, to help you avoid any 'panic' decisions for your portfolio, and also to help you make better decisions to acquire new assets.

I organised this article in two sections: what to do with your current portfolio, and what you can do to actually benefit from this crisis to acquire new assets. As I only talk on my website about what I know & investments that are in my own portfolio, I will only speak about my two favourite assets that compose my portfolio: crowdlending platforms, and dividend growth stocks.

Managing your current portfolio

Let's first see how to manage your current portfolio during the crisis, starting with crowdlending platforms. I know there was a lot of panic sell during the early stages of the crisis, due to people believing that because the crisis is there, people & businesses will stop repaying their loans and the whole sector will crash down. I saw some people on large platforms discounting their whole portfolios with discounts as high as 30% to try to sell them quickly.

My advice is not to lock in a large loss purely out of panic. During the 2020 shock, platforms published updates about how they were managing repayments and defaults. The broader lesson is to read current platform communications, examine the underlying loans, and decide from evidence rather than headlines.

On my side, and as I trust the platforms I have currently in my portfolio, I will simply hold on my crowdlending positions till the crisis has passed. The only case that I see for selling current investments in crowdlending platforms is to actually get some free cash to invest in the stock market. More about that in the second part of this article :)

Now, let's talk about dividend-paying stocks. Just like with crowdlending platforms, the best thing I believe you should do during those times with your existing stocks investment is ... nothing. Except if you saw this coming and sold some of your stocks when the market was still high, chances are that your stocks portfolio lost a lot of value recently. My own dividend growth stocks portfolio lost about 30% of its value.

Is that actually a problem? Not really. With this strategy of investing in dividend-paying stocks, I focus solely on dividend distributions. For all the companies I have in my own portfolio, the future dividend distributions didn't change at all. Some companies did announce dividend cuts, especially the ones directly affected by the crisis, like airlines or airplanes manufacturers. If the crisis was to continue further in time I do believe more dividend cuts would happen, however I am confident they will only be temporary and they would go back up as soon as the crisis is over. Of course, given that you invested in 'blue chips' companies that are big enough to survive such a crisis.

In all cases, I truly believe the best thing to do at the moment with stocks is simply to hold and don't sell any position in your portfolio.

Making new investments during the crisis

Now, let's see how you can actually make new investments during the crisis. I hate the word 'opportunity' in this case as everyone is suffering, but there are definitely smart choices you can do when investing in new assets at the moment.

On the crowdlending side, I recommend reviewing platform quality, loan diversification, and liquidity before committing new money. You can find my current selection in the best P2P platforms guide and my real estate crowdfunding comparison.

It gets more interesting in terms of dividend growth stocks. Indeed, the market is down as a whole, meaning that there are great opportunities currently on the market. I would avoid anything related to travel of course, such as airlines companies, airplanes manufacturers, or hotels chains. This is not a stock recommendation as this can change daily, but stocks like IBM, Pfizer and AT&T are currently at a great discount with yields over 5%, which is something I didn't see for a long time. So if you have extra cash, now is definitely a great time to shop some great dividend-paying stocks. Of course, I always recommend to invest in large companies only, outside of the sectors I mentioned before, so you only invest in companies that are solid enough to go through this crisis without any long-lasting damages.

For a current overview of the method, read my dividend investing guide.

I hope this article will help you to navigate through this crisis in terms of your investing strategy. Of course, if you have any questions or suggestions don't hesitate to leave them in the comments!