Strategies to Optimize Your Investment Portfolio in 2020

Updated: May 21

The World Has Changed, and so Should Your Investment Strategy


The World Has Changed, and so Should Your Investment Strategy


During this COVID-19 global pandemic, businesses and investors have been forced to think carefully about their investments. The mission of this article is to guide you through the different ideas we have for you to diversify your portfolio and take advantage of the unique opportunities that arise from a crisis.


We will analyze things like the price of the dollar, the fluctuation of interest rates, using savings smartly, and some market opportunities.


The Price of the Dollar & Interest Rates


During regular times, the dollar changing 1% against the Euro or Pound would be impacting. But, these are not normal times. The dollar has been declining in value as the Federal Reserve slashes interest rates to generate more loan availability, and the governments prepare stimulus packages.


In the U.S., interest rates were lowered to ease the burden citizens and small businesses are acquiring during the shut down of operations. However, they are due to go back up soon. For instance, SBA Loans were on the surge at lower-than-normal interest rates. This way, local businesses can increase their funds to sustain the impact lower spending can have. Plus, some individuals were given the opportunity to refinance current loans. Yet, lenders were being extremely cautious during this process to prevent future tanking of the financial systems. Therefore, if you can still apply for these incentives, take advantage of this before rates hike back up.


Moreover, the price of the dollar in comparison to the Euro and Pound will take an unexpected hit. Since the recession of 2008, banks and governments did not prepare the financial systems for this pandemic outbreak. As a result, the federal reserve was forced to turn on the printers and push more cash towards the economies; and, the U.S. government passed a $2 trillion dollar stimulus package. Other major economies in Europe and Asia are also moving forward with programs to lessen the impact of the coronavirus outbreak in their economies.


If you are an international borrower, you could take advantage of these price fluctuations. For instance, if you have a European-based business, you will have stiffer rules to borrow in the U.S. So, you could borrow in your home economy and transfer payments to another company that needs funds in Europe's common currency.


Smart Savings - Don't Hold Too Much Cash


As an investor in these times, you can increase your cash flow from passive investments like rental properties. In Florida, the market is becoming increasingly more competitive. Cash is still being injected into the economy because let's be honest, we are not going to be in this crisis forever. Therefore, making strategic investments taking advantage of the effect this coronavirus has had on prices can be a profitable move in the long run. It's like ABC's Shark Tank's Mark Cuban recently communicated, "we are truly going to see the best of capitalism when we come out of the other side."


First, you could use tax strategies like the 1031 Exchange to upgrade your assets. In resume, the 1031 Deferred Tax Exchange allows you to sell a property and move the capital to a better investment without incurring all the taxes due at the time of sale. This capital can be divided into multiple properties or improved single property. This will increase the value of your portfolio and reduce risks.


Moreover, there is also the Tax Cuts and Jobs Act of 2017 where designated areas by the IRS have been labeled as "Opportunity Zones." These designated geographical sectors allow investors to move capital into lower-income areas that can use economical developments to grow the community. By investing in opportunity zones, investors can take advantage of tax advantages as far as not paying taxes on previous capital gains invested in projects like such.


Unique Opportunities During Crisis


During this crisis, many have fallen into a high level of anxiety that could cloud judgment when making decisions. Don't be alarmed! Here, we will list some unique opportunities emerging during the outbreak. You should sit back and reflect on how you could take advantage of some of them.


  • Lower Interest rates could help you increase portfolio value (these rates won't last forever).

  • 1031 Exchange could help you protect the equity earned in previous property investments.

  • Opportunity Zones could help you move tax-deferred capital gains from multiple types of investments.

  • Airbnbs and rentals in remote areas are experiencing high levels of bookings from people trying to get away from main cities. Consider providing discounts for month-long bookings to generate cash flow.

  • Airbnbs and rentals in cities near major universities are experiencing month bookings from students who can't go back home. Consider providing special rates for month-long bookings.


In conclusion, take advantage of the time we all have to reflect and strategize your portfolio. This way you will keep the boat afloat during these turbulent times.

WATCH THE ROI TALK #2

OPPORTUNITIES DURING COVID-19 CRISIS


For personalized advice on how to make the next move, schedule an appointment and we will be happy to guide you. Stay healthy and safe!



Sources:

https://fortune.com/2020/03/22/king-dollar-headache-global-economy-coronavirus/

https://www.bloomberg.com/news/articles/2020-03-17/how-cross-currency-basis-swaps-show-funding-stress-quicktake


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