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Can we invest during a financial crisis?

Financial crises can have different origins. Normally, a word related crises in fear and anxiety in the average investor, am I right? While most investors look to reduce their chances of generating income, some people find themselves in these situations attractive investment opportunities for your money.

Let’s see the real estate bubble. This was a financial crisis that was initially spread in the United States due to subprime mortgages, whose interest rates were higher than personal loans. The crisis exploded in August-September 2007. Here I show a graph of the S & P 500 (stock index), where you can see a sharp drop of the same throughout the year 2008

Now let’s review the Dotcom Crisis, it was a speculative trend that occurred between 1997 and 2000. This period saw the emergence of a new group of Internet-based companies. The high speculation and wide availability of venture capital created an atmosphere of euphoria and the outbreak of the crisis ended in a recession in Western countries. 

This sharp decline in equity markets had a huge impact on investors. The question is:

Do we Only Lose Money in a Crisis?

Now I show a graph of DollarIndex (an index that measures the value of the US dollar against a basket of major foreign currencies) during the Dot Com Crisis:

Why is this happening? During times of crisis in financial markets, most investors take refuge in a safe global instrument: Sovereign Bonds of the American Federal Reserve.

But to buy these bonds, you should buy in US dollars. When large amounts of money are focused on buying US dollars, it tends to appreciate; as a result “normally” – exciting hikes in the US dollar in times of fear and uncertainty, increases that can be exploited for the investor knowledgeable and can detach from the typical “ego” of always being right look. Never forget that the market ALWAYS ends up having reason and must be followers of him at all times.

“It matters not whether you’re right or not. What matters is how much you make when you’re right and how much you lose when you’re wrong.”

George Soros


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