Acute phase capabilities

Investments made today can multiply in value

It is believed that the crisis, especially its acute phase, is a good time for long-term investments. The advice, of course, applies only to those who still have something to invest. The current acute phase also provides good opportunities for both speculators and long-term investors. It is only important to act carefully, not to succumb to excitement and once again not to commit rash acts under the influence of momentary factors.

Level of risk

First of all, it should be noted that all this does not cancel the systemic risks hanging over the Russian economy, and the expediency of having some kind of cash reserve (dollars are better suited for this purpose in the current situation) in order to survive a possible repetition of the end of 1980 with less losses. x - early 1990s of the last century (for more details - NT No. 42 of December 14, 2015). Russia's repeating the fate of the USSR, with all the ensuing economic consequences, is an increasingly likely scenario, but not predetermined. No competent analyst will ever give a 100% forecast. Moreover, quite often one hears statements like "the probability of strengthening (weakening) of the ruble (dollar, oil, stock indices ...) is about 50%." Translated into human language, this means only the fact that the ruble (dollar, oil, stock market ...) will either fall or rise. To give out this kind of "analyst", you do not need to be seven spans in the forehead and understand anything.

Therefore, in order not to resemble such “stock market gurus”, I will immediately make a reservation that the probability of an “apocalyptic” scenario, which will be accompanied by a socio-political crisis, the collapse of the banking system, hyperinflation and other troubles for all residents of the country, without exception, I estimate at 70 %, and the implementation of this scenario is possible within the next two years. However, a 70 percent chance is by no means 100 percent certain. Therefore, when we talk about investments today, we are talking about amounts that go beyond 70% (everyone evaluates the systemic risk on their own, and for some it may be 20%, for others it may be 80%) "airbags ', which should be the default. In the previous issue of Notes of an Old Speculator, it was already said that in the current situation, investing in dollars may well bring a loss, which, in fact, is not such, since buying dollars is not an investment, but insurance, a payment for getting rid of fear and an excuse once again commend yourself for your foresight. This is especially true for dollars bought with borrowed rubles.

The probability of an "apocalyptic" scenario, which will be accompanied by a socio-political crisis, the collapse of the banking system, hyperinflation and other troubles for all the inhabitants of the country, without exception, I estimate at 70%

Keeping all the above reservations in mind, it should be added that investors who bought shares at the peak of the crisis in late 1998-early 1999 or late 2008-early 2009 made super profits. Which would be more than enough to cover any costs of "insurance" against the final and irrevocable economic catastrophe - and after all, even then many prophesied it. Suffice it to say that the dollar (!) RTS index, despite all the recent collapses, has not yet reached the lows of January-February 2009, and those who bought the stocks included in the index then are still in positive territory, and even if we count in dollars. Then, over the next three years, the index grew more than 4 times - from 500 points in February 2009 to 2100 points in March-April 2011. This means that $500 invested in 2009 in stocks included in the RTS index, in an index fund or in futures contracts on the RTS index turned into $2,100 in just over three years.

But there are not many speculators and investors who managed to transform their $500 into $2100. Someone started buying too early, and then suffered losses, longingly watching the depreciating assets in their portfolio. Someone (including the author of this note) took profits as early as May 2009, believing that a twofold increase in investments in three months is a very good return. And there are still a huge number of people - professional speculators and private investors who considered in July-August 2008 that the market had reached the "bottom", bought shares or futures contracts for indices using "leverage" and lost all their money in October.

simple recipes

In order not to repeat these mistakes and still get a profit from investing in the stock market (assuming that in the foreseeable future Russia remains a country in which the stock and currency markets still exist), it makes sense to follow a few simple rules.

First, it does not make sense to invest all the money intended for investment at once, no matter how attractive the price may seem. An example is the Ministry of Finance, which at the end of 2008 bought shares of Russian issuers with money from the National Wealth Fund (to support the market). Buying was carried out daily, in equal shares. As a result, VEB, on the balance sheet of which the shares got, managed to get more than 100% yield in less than a year.

Secondly, when buying, one must be mentally prepared for the fact that prices can drop even lower. And if this happens, rejoice at the opportunity to buy more, but cheaper. And even if the money is over, and the price continues to fall, this is not a reason for despair. Sooner or later, the market will return what is invested in it.

Thirdly, it is better to avoid excessive activity. Catching all the fluctuations is an even more impossible task than finding the “bottom” of the market. It is better to set the goal of the movement in advance and wait for it to be achieved. For example, the RTS index, which is currently trading around 700 points, has every chance to return to the November 900 points in the spring. This, of course, is not a two-fold increase, but if a 30% probability is realized that Economy Minister Alexei Ulyukaev is right and the worst for the Russian economy is left behind, and we can expect a two-fold growth, moreover this year.

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