In an uncertain market you can never be too sure whether your investment decisions are going to be worthwhile in the long term. You may even be taking a step backwards adding precious years on the road to financial independence. So why in the world would you want to invest in a declining market? What advantage would it serve to invest when everyone else is looking elsewhere for opportunities? Most investors play the role of sheep all too often. They follow the herd into the areas of opportunity long after the wolves have already set up camp. Sure they might see capital gains towards the end of the cycle. They might be able to kick start their portfolio once they have built some equity. All in all, investing in an area because it has become a “hotspot” is usually a little too late. This isn’t to say following hotspots is a poor decision or one that will be detrimental to your investment strategy. The best opportunities can be found well before they are discovered on the mass scale.
The Market Will Rebound
When focusing on a market in decline, one thing can be certain, it will always rebound. While it might take some time to return to the previous growth experienced prior, there is still room for growth. Ensure the proper research is undertaken and discover what is causing the market to decline in the first place. In many cases the market may have undergone a period of speculation in which values had risen rapidly and is now undergoing a period of market correction. In this case you want to see where the value lies in these areas. Are they in areas close to employment, industry, good schools, transport, business or rank high in safety? These are the elements that will allow property to hold their value and become viable investment options and making moves on the market when in a buyer’s market means you can take advantage of undervalued properties.
Buy When It’s On Sale
Approaching a declining market with fear is viewing the glass half empty. A declining market in the short term is seen a contraction in capital growth. In the long term it is an opportunity to acquire undervalued properties, which are poised for growth. Warren Buffet, the most successful investor in the world has often been quoted stating “Be fearful when others are greedy and greedy when others are fearful”. Approach your investment opportunities with optimism when all others are selling fast and you will see what the rest are turning a blind eye to out of fear for the short term. After all, when is the best time to furnish your home or buy Christmas presents? When they are on sale and the prices are slashed. The same can be thought of for assets, especially when investing for the long term.
Timing It Right
If your investment strategy is more of a short term, high risk, high reward style of investment such as small development or renovation, a declining market may still fall within your reach as an opportunity rather than a threat. If you keep an eye on the market for a period of time and stay ahead of sales data to the point where you can see the light at the end of the tunnel, you can still be highly rewarded in times of doubt. This comes towards the end of the market bottoming out and if timed right, can see you staking your claim long before the news reaches the masses. Once it does, you are able to sell at a premium for something nobody wanted just a few years earlier.