The best assets to invest in during a stock market crash

Stock market crashes happen more frequently than you think. However, they can be an opportunity for investors, provided you know how to react.

History shows us that the financial and stock market system is not based on solid foundations. Crashes are recurrent. Often, the consequences of these financial crises are felt on all investments, whatever their nature (crypto-currencies, Forex, commodities, etc.). But, it can also happen that a stock market crash affects only certain assets. Fortunately, there are always safe havens, even in a crisis. 

This article details the right approaches to help you choose your investments.

Investing during a crisis is possible

A stock market crisis is not an obstacle to your investment project. It is true that taking advantage of the situation is difficult, but there are always safe havens in which to invest. These depend mainly on the particularity of the crisis. 

Note that investing your money can be a way to keep it safe. In times of war for example, investing your money in gold is a way to save it from depreciation. The real estate sector, on the other hand, is a favourable investment ground regardless of the nature of the crisis. This type of asset increases in value over time and can benefit both the investor and their future beneficiaries.

Where to invest in case of a crisis

In the event of a stock market crash, avoid short-term thinking. Asset values are likely to be unfavorable in the days or months following a crash. If you are in the midst of a crash, you usually cannot act immediately. 

Then think about long-term investments that can pay off. In this sense, find out which assets are less affected by the crisis. Also remember that even the assets that seem the most fragile can recover sooner or later.

Is investing in crypto-currencies safe in times of crisis?

Predicting how the price of crypto-currencies will move in relation to a particular event is still quite difficult. This asset is still very volatile.

The mere decision of a company to refuse crypto-currencies in exchange for their products is enough to make them flinch. This was the case in May 2021, when Tesla executive Elon Musk announced he would no longer accept virtual currencies. The prices of the vast majority of cryptocurrencies plummeted and could only recover after several weeks.

Nevertheless, history tells us that crypto-currencies are among the most crisis-resistant assets. Between March 2019 and March 2020, the price of Bitcoin rose from €5,000 to over €50,000. An increase approaching 2000%. Most crypto-currencies have experienced a similar increase during this period.

Specialists put forward another explanation for this surge in the price of virtual currencies. They say that this success is due to lockdowns and forced savings of households. Indeed, many people have been forced to look for other alternatives to invest and use their money. These people have rushed to crypto-currencies, perceived as the most promising assets during this period.

Is gold a safe investment?

What is certain is that the price of gold is less volatile than most assets. On the contrary, the price of gold often appreciates in times of crisis or loss of confidence. This happened during the health crisis of 2020. In August of this year, the value of the yellow metal reached an all-time high. Moreover, gold is quoted in dollars. This means that when the dollar falls, the value of gold systematically rises.

Moreover, gold is not a liability. Theoretically, a bond becomes obsolete, for example, when the issuer, the ultimate payer, is unable to pay. Gold, on the other hand, is not attached to anything. It can be sold anywhere in the world and can be exchanged for any currency or other form of payment.

In particular, there are three ways to buy gold in times of crisis:

  • buy physical gold and place it somewhere safe from prying eyes
  • buy gold through a trusted financial intermediary, and place it in a secure vault
  • buy gold through the stock market

Some investment advice in a crisis

Don't panic

The first rule is not to panic. If the price of an asset you own seems to be plummeting, for example, take the time to think it through. If you give up everything on a whim, you risk:

  • selling at low prices, therefore at a loss most of the time
  • missing the opportunity of the rebound, since history has taught us that there is always a rebound after declines.

The value of most assets in the stock market increases over a longer or shorter period of time. Thus, even after a fall, one can expect a recovery. Note that the period of rise is often longer than the period of fall.

Take advantage of those who panic

There is nothing immoral about taking advantage of other investors' panic. It's even a game to be played. Investors, most often amateurs, will sell at low prices. This is the time to expand your portfolio. The basis of a good investment is the acquisition cost, you will have the opportunity to take advantage of the best prices in times of crisis.

Always remember that a falling asset price will eventually rise again. And more often than not, it will rise even higher than its initial value.

Diversify your portfolio

"You can't put all your eggs in one basket". This statement has its place in the stock market world. Indeed, to succeed in this environment, it is imperative to diversify your portfolio.

First, diversify your asset classes. For example, mix stocks, bonds, commodities and currencies. You can also diversify the geographic location of assets. For example, you can invest in the U.S. market, the Asian market and the European market at the same time.

Also, invest in a variety of industries. For example, when investing in corporate stocks, vary between the oil sector, tourism or consumer goods.

You can even consider other investments like gold or crypto-currencies, but also life insurance or savings books. Depending on the amount you have, you can also consider real estate investments.

In summary: How and what to invest in during a crisis

Sometimes not reacting is the best response to a stock market crash, since things usually work themselves out. Instead, watch for opportunities that arise, especially those offered by panicked investors. Nevertheless, some assets are more reliable than others, like gold or crypto-currencies.