Types of businesses to invest in during a crisis

While investors may become hesitant, about new investments, during a crisis, there are actually some businesses that are worth investing in, even during troubled times. Part of the reason is that during a crisis, access to funding is a problem, because banks are in desperate need of capital and can't take risks that in ordinary times would be prudent. As a result, businesses that otherwise may have survived, might not make it through if conditions, continue to deteriorate for the long term. The intelligent investor is going to want to focus on companies that boast several characteristics. These characteristics are generally the same for every type of business, not matter the industry. The type of businesses to invest in during a crisis will-

• Have good long-term prospects-This enables them to survive no matter the current market conditions
• Have little or no debt, especially short-term debt that will need to be refinanced-This indicates that the business has been managed prudently.
• Have plenty of cash on hand-A business liquidity, again, indicates good money management.
• Have high returns on equity that allow it to generate large gains on book value each year-This indicates that your investment will continue to increase in value, as well.
• Have products that are necessary (drugs, food, consumer staples, etc.)-Luxury products and non essentials are the first things consumers cut back on during a crisis. Businesses that make essentials are guaranteed to continue to have a place in the market.
• Have a disciplined management team, with the experience, to steer the company through the current market environment-Remember that no matter how good the idea, you are really investing in the people who manage the business.
• Remember that all crises come to an end. You want to exit this period of time with investment purchases that will reward you for your insight and patience. Other factors to consider when determining the right type of businesses to invest in are-
• What price point does the company market to?Discount goods, remain strong (and get stronger), during a financial crisis.
• Will the businesses be able to remain strong when the crisis has ended? While it can be tough to stay profitable during a crisis, some types of businesses fade away as the economy gets stronger.
• Does the business provide a service that the need is fairly constant, despite the market conditions? There are service oriented businesses that are barely affected by market condition, and these can be excellent investment opportunities.
• It is crucial to remember that the basic of investing apply more then ever, during a financial crisis. These are-
• Buy in quality and then hold.You do not want to fall for fads in the market. When you buy a significant position, within a company, you are increasing your potential for reward. In addition, you must understand that investing overall is not a get rich quick scheme. You need to realize that smart investors are in for the long term. This is never truer then when you are investing during a crisis. Remember that you investing because the market is low, but it won't always be.
• Always do your homework. Every investor needs to understand what they are investing in. You should not invest in something just because someone else does, it seems trendy, or you love the product. Smart investing means educating yourself about the best way to invest, and what you are actually investing in. After doing the homework, if you don't feel good about the investment, don't understand it, or even don't feel strongly about it, those are all red flags that you should just walk away.