Investment Lessons That You Can’t Do Without

The recession has taught all of us some lessons in investing that we cannot forget. Some of us had seen success while most were not all that successful. In either case we have emerged wiser about what investments we should make. You might know for yourself what works but sharing your thoughts with a similar interest group is going to help you in understanding what went right or wrong better so that you are better geared for the coming days when you’ll be facing new opportunities and have to make the most profitable investment.

By the way, did you think that the US Treasury bonds were the best investments? You’re wrong my friend !If you’ve thought that running from the failing US stock markets to the succeeding Chinese markets was a smart move, let me tell you, that you aren’t all that smart after all. Did you choose the investment that rose steeply after falling steeply? You might have, but that again is a wrong choice.

Firstly to make your investment choices you need to analyze the performance of investments across a finite period of time, let’s say for the last two years, when the recession had actually started. Investments that did well even if the timing was not the most appropriate are the ones that you should find out. You should pick up those investments that did well despite bad timing.  The evergreen investment opportunities that have stood the test of bad times and have remained at a high or an almost high are the ones that you should identify. You are not risking any losses then. You always tend to win in such situations.

Due to falling and fluctuating stock conditions you might have contemplated investing in Treasury Bonds, but it was seen that Treasury bonds that looked to be in highs is not immune to fluctuations. In fact now the Long Term treasury Index of JP Morgan is lower by 11 % than what they were during the recession. In the middle of December last year they were on a high, but by June the loss was about 17 %. The T-bond performance was better than that of stocks, but with a long period purview they were no better.

Well, if you think I’m giving thumbs down for T-bonds, what according to me should be the most profitable investment that should have been made? Have you ever tried to invest in corporate bonds? You might have looked upon them as some inferior bonds but they are the ones that seem to have done well. From January they are up by 32 %. The stock markets might have fetched you a gain of 48 % during the crisis but they are deviant from their highs by 36 %. So junk bonds are still the more favored ones. You start from the bottom and you’ve got nothing to lose. Even though you had bought and sold them at the wrong times you lost only by a small margin.

Gold investments were another good investment that you could have made during the recession. Because it’s intrinsic value did not fluctuate. The deviation from the high was only about 1 % and that is not much.  With a gold investment by now you’d be better off by 53 % under favorable market conditions and otherwise you’d gain 35 % which is the same as the corporate bonds.