SOME ETERNAL SUTRAS FOR INVESTORS

Indian Economy & M What's the best way to survive a financial crisis with your wealth intact?

- James Rickards

Well, not many can answer this question. However, James Rickards goes in detail with some examples that there are opportunities to make money in recessions, but one must distinguish among the three stages and pursue different strategies in each stage. Stage 1 is dominated by cash and Treasuries and dodging the recession bullet. Stage 2 is dominated by selective stock picking that spots the sectors that perform well in hard times. Stage 3 is bottom-fishing in stocks more broadly to prepare for the next rally.

What's the best way to survive a financial crisis with your wealth intact? The answer may surprise you. Many investors would say, "Sell everything, and wait until it's over!" That's almost never good advice.

In the first place, some assets perform well in crises, and you should hold onto those. Secondly, how do you know a crisis has actually started?

What seems like a crisis may just be a short-term bump in the road. And finally, how do you know when it's over? There were numerous 20 per cent stock rallies during the Great Depression even as stocks were grinding lower over a threeyear crash.

I'll tackle these specifics below, but I should point to an important aspect first: In any financial or market condition there are winners and losers. Diversification and timing are the keys to emerging as a winner.

Great Depression Made Fortunes

There are many famous examples of winning trades in recessions. Here are two of my favorites: