What to invest in when a crisis hits

Covid-19 | Covid-19 Advice | Financial Services | Funding | Reports

Investing can be a tricky business and while it can pay well, the inherent risks involved can also see the scales slide in the opposite direction. This has largely been the case so far this year with the spread of the Coronavirus causing havoc across a multitude of financial markets.

With this in mind, peer to peer lending platform, Sourced Capital, has looked at which investments are considered good options during a crisis and which have seen the greatest return over the last decade for those looking to invest over the coming months.

Precious Metals

A traditional investment option for many but investing in precious metals can bring varied returns depending on your commodity of choice.

If you’re looking to invest today based on performance over the last decade, silver and gold have seen an increase in value of 10.6% and 43.1% respectively, however, those branching out into Palladium in 2009 would have seen a huge 470% increase.

The same can’t be said for Platinum, however, with stock prices diving by -28% over the last 10 years.

Dividend Aristocrats

Dividend aristocrats are perhaps a safer bet when investing in stocks and shares. These business behemoths have earned this prestigious title due to paying and increasing their base dividend for at least 25 consecutive years.

Top of the table is financial giant Cincinnati Financial, who have done so for 59 years on the bounce and investing just a decade ago would have seen a 312.4% return today.

While there are a wealth of dividend aristocrats to choose from, in the current crisis, consumer staples have seen a huge surge in demand, largely due to panic buying in anticipation of a shortage.

If you’re thinking of investing now to ride this wave, historically, Coca-cola, Colgate-Palmolive and Procter & Gamble have seen the longest string of dividend payouts; 56 consecutive years to be precise.

When it comes to returns Coca-Cola has seen a 108.5% increase in stock price, followed by Procter & Gamble (104.3%) and Colgate-Palmolive (96.7%).

However, Sourced Capital has highlighted two alternative options that may suit the current climate better for an investment.

Healthcare superpower Johnson & Johnson has seen a 133.5% increase over the last 10 years. Even better still, with many of us in need of a drink, investing closer to home in the UK-based alcohol and beverages company Diageo could make a sound investment. The firm has seen an increase in stock price of 183.6% over the last 10 years.

Property

For many, property is a more straightforward investment but with the UK property market in a deep freeze until the lockdown is lifted, values are predicted to take a hit. Investing when they do could prove a lucrative option as UK house prices have increased by just 43.3% in the last decade; a better return than the majority of precious metals but some way off the return provided by the top dividends aristocrats.

However, in London house prices have increased at almost double the UK average since 2009 (83%). The largest increase of the lot has been in Waltham Forest with prices up 110.1%, while outside of London Cambridge has seen a 79.4% increase.

Of course, not everywhere is a sure thing and in parts of Northern Ireland prices have fallen by -10.6%, while they’re down -3.3% in Middlesbrough and -2.9% in Aberdeen.

So like all investments, bricks and mortar carries its own risks and picking the right spot for investment can make all the difference when it comes to success or failure.

For those that don’t want to go the whole hog of investing in their own property, peer to peer investment platforms such as Sourced Capital provide the option of investing via an Innovative Finance ISA.

The IFISA is a category of ISA which was launched in April 2016 for UK taxpayers and can provide returns as high as 10-12% an annum, although capital is of course at risk.

Similar to a Cash or Stocks and Shares ISAs, the IFISA allows you to invest money without paying personal income tax with an allowance of up to £20,000 a year.

Stephen Moss, founder and MD of Sourced Capital, commented: “Like all areas of life at the moment, investment has taken a hit but while times are tough at present, crisis always presents opportunity when the dust does settle.

If you’re thinking of investing now, these are a few of the array of options that have proved to be consistent in the long-term and while some are more turbulent than others, investing should always be done with a long-term view and across a variety of categories to maximise profitability and reduce risk.”   

Ranking – by average % change
Investment category Sub-category 10 year point to point difference (2009-2019)
Precious metals Palladium (per ounce) 470.0%
Dividend aristocrats Cincinnati Financial (US) 312.4%
Dividend aristocrats Diageo (UK) 183.6%
Dividend aristocrats Johnson & Johnson (US) 133.5%
Real estate Waltham Forest Average House Price 110.1%
Dividend aristocrats Coca-Cola (US) 108.5%
Dividend aristocrats Procter & Gamble (US) 104.3%
Dividend aristocrats Colgate-Palmolive (US) 96.7%
Real estate London Average House Price 83.0%
Real estate UK Average House Price 43.3%
Precious metals Gold (per ounce) 43.1%
Precious metals Silver (per ounce) 10.6%
Real estate City of Aberdeen Average House Price -2.9%
Real estate Middlesbrough Average House Price -3.3%
Real estate Ards and North Down Average House Price -10.6%
Precious metals Platinum (per ounce) -28.0%

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