What Mindset To Keep In Time Of War?

On 24 February 2022. Russia invaded Ukraine, right in front of global eyes and heightened media scrutiny. Heart-wrenching to see old people leaving their home bringing what little they can, parents carrying kids and pets, families saying goodbye as they are forced to part, couples sharing a kiss before the man joins the frontline fight for freedom. Images that will haunt for a long time to come – emotional, stirring and disturbing. 

A Ukrainian contractor who worked on several of our properties in Amsterdam left a week ago to return to Ukraine to be part of the resistance together with his son. He was stoic and matter-of-fact when he told us of his decision. It is a war of his country, his people, his family and his future. Vasili is his name and I hope to see him again. 

I am shaken by the turn of events as Europe has been my home and primary residence the past 2.5 years. The proximity of the war makes it very real, a sort of clear and present danger. I have been to several churches to offer prayers and light candles for peace and for the victims.

Sobering Reality

In light of what is now a sad and terrible reality, what can we do? First and foremost, if you feel compelled to help, there are major initiatives and crowdfunding to support the Ukrainian crisis. If there are initiatives within your community, by all means. In such times, every little help and donation matters. Every life saved is one small victory against the atrocity of war, an act for humanity.

What about our retirement plan and position as an investor? What attitude and mindset is sensible now?

Financial Prudence

An important aspect is to safeguard and secure our financial position. We are already witnessing the spike in oil and commodity prices due to the war, economic disruption and possible sanctions of Russian oil and gas. Inflationary pressure is now even more and the likelihood of recession has elevated. 

This is the time to think and act defensively. Protect current holding over making higher returns. Stay invested as history has proven that despite wars and unforeseen events causing markets to tank they always recover. Cash is unwise and should be invested to retain its value. But what type of assets should cash be flowing into?

Real Estate

Bricks and stones are where money takes flight in times of uncertainty. It is a proven asset class that hedges against inflation and provides cash flow through rental income. Better still if using mortgage to finance purchases as the ensuing inflation will cause the debt to shrink. 

Since changing our minds about Malaysia, we have been looking for a 2nd home in Europe that is accessible by car should there be a repeat of pandemic restrictions. Coming to the final leg of our exploration, it looks like Spain, a most special place in the sun, has won over our hearts, particularly the southern coast of Costa del Sol. 

Despite having cautioned that holiday destinations are a riskier investment in an earlier post, Costa del Sol shines as it has strong domestic tourism (ie less affected by border closure and flight restrictions), a good and diverse rental market ranging from international jet setters, holiday makers, golfers to snowbirds, hence offering income resilience and versatility. 

Stocks

Since the start of the war, stocks have taken a beating from US to Europe to Asia. There are now opportunities to make entry. I have been and will continue to allocate funds into proven companies with strong free cashflow position and good profitability. The beauty is that there are many such pickings that also pay dividends, especially in the Singapore and Hong Kong bourses, providing both income and capital appreciation. If you are not into stock-picking, then buying into S&P 500 index or ETF is a good bet.

It is anybody’s guess as to when the market will bottom, so phase your investments. This takes away the stress and temptation of market timing, smoothening out the kinks of volatility. So instead of plonking lump sum at 1 go, spread it over 6 or 12 months. 

China

After a year of intense regulatory interference by the government, Chinese stocks have been through significant correction, presenting attractive buying opportunities. In addition to equities, Chinese bonds is another contender as their prices have been increasing in line with the rate cuts by the government to stimulate recovery from pandemic woes. This is in contrast to US Treasury bonds, where the Fed has committed to increase base lending rate, which will cause bond prices to tumble. 

Collectibles

An unexpected surprise in our portfolio in terms of gains has been that of collectibles. Our collection include antique cars, watches and designer bags, some of which have doubled in value within 2-3 years! The great thing about collectibles is that one can enjoy it while waiting for appreciation. The ongoing supply chain issues will likely cause this trend to continue. Walk into any Rolex shops and you will see half-empty shelves. Demand is far outstripping supply, causing secondary market to flourish. 

This increase in prices is attributed to the pandemic, which has prevented travel and other big expenditure. It has also brought about a realisation that living in the moment is important given the fragility and unexpectedness that life can throw us.

Gold

A conventional go-to asset during times of trouble and volatility is gold and its related indexes and ETFs. Gold price has gained more than 20% in the past year alone and continues to see strong appreciation, stoked by fear of inflation and war. As long as threats of inflation and uncertainty remain, it will sparkle. History has proven that it can deliver at least better-than-inflation returns.  

The Right Mindset?

It may seem odd and counter-intuitive but in time of crises – inflation, war, recession – the right mindset and action is to invest in assets. Be it real estate, stocks, gold or collectibles – it is prudent to invest and stay invested. Being on the sideline and keeping out of harm’s way will cost you more through loss of return and devaluation of wealth. 

Keep alert and invest in what you are familiar with. Capital preservation should take priority over yield. Now is not the time to be fancy or go into uncharted waters. Safety is in experience, knowledge and proven track record. Let that be the guiding mindset and compass to navigate the stormy waters ahead.

Ahoy!

Savvy Maverick

(Main image: Christian Lue, Unsplash)

Disclaimer: The views expressed here are drawn from my own experience and do not constitute financial advise in any way whatsoever. Nothing published here constitutes an investment recommendation, nor should any data or content be relied upon for any investment activities. It is strongly recommended that independent and thorough research is undertaken before making any financial decisions, including consulting a qualified professional.