Five Considerations for Investing in Turbulent Times

Profitable investing has always required a sound strategy and a willingness to either hold your investments for the long-term, or pivot on a dime when the economic situation shifts. SWS Venture Capital, founded by serial entrepreneur Steve Streit, agrees the former is a smart approach for investing in turbulent times.

While the SWS slogan is “powering disruption,” the company maintains a long-term approach to investing, encouraging its existing portfolio companies to “tighten up, raise cash while possible, and execute with discipline.”

The economic downturn is affecting fundraising, however, making it more challenging for startups to raise capital. “There is no question that most VCs and angel investors are now being much more selective in choosing the companies in which they invest. They’re also being more conservative in how they value those companies,” explains Streit.

Here’s what to consider if you’re planning to invest in a volatile market:

Focus on the future. Remember the song “Tomorrow” from the musical Annie? Remember Scarlett O’Hara’s famous last line in Gone With the Wind? Tomorrow is another day, and this needs to be your focus when investing in turbulent times. Plan not only to hold your investments until tomorrow (figuratively speaking; tomorrow might be five years down the road), but think about investing in companies that are working to build a brighter tomorrow for us all. For example, companies working in renewable energy could be a smart bet. 

Mix it up. With the exception of marriage, it’s rarely wise to place all your eggs in one basket. When it comes to investing in an uncertain climate, diversifying has never been more important. According to the Harvard Business Review, “Diversity significantly improves financial performance on measures such as profitable investments at the individual portfolio-company level and overall fund returns 

Stay scam-free. There’s always another Bernie Madoff lurking in the wings, ready to bilk hopeful investors out of their life savings. If it seems too good to be true, it usually is, particularly when it comes to get-rich-quick schemes. If you choose an investment advisor, you may want to work only with a registered, vetted investment professional, and don’t allow your desire for a high yield to allow you to fall prey to smooth talk or a “risk-free” pitch.

Stay cool. Some people complain that their partners don’t show enough emotion. In a relationship, being able to express emotion, especially if you’re sad or angry, can be beneficial. In investing, not so much. You want a cool head around money in all its forms; emotional involvement can cause you to make poor decisions. So tune out all the “noise” and maintain your strategy. This is what will ensure your long-term focus pans out.

Know your risk tolerance. SWS “looks for companies that have solid plans to either create products that are new to consumers or create products that have the opportunity to replace or disrupt existing products or business models.” This is because Steve Streit, who founded a company that helped spark the fintech boom, understands the value of disrupting legacy industries.. This is also why being able to hold your investments for the long term in a volatile economy is so critical to a successful financial outcome.