It’s now been three months since we all battened down the hatches and transitioned into a hermit nation. We’ve become accustomed to working from home, queueing for groceries, and using Zoom to keep in touch with our colleagues, families and friends. While the UK might be slowly emerging from its collective slumber, it could still be a long time before normality resumes. With increasing numbers of furloughs and redundancies in the wake of the lockdown, maintaining one’s finances has never been more significant.
We all like the idea of using our money to make more money, after all it’s why we rarely let our earnings languish away in banks doing nothing. We deposit our hard-earned cash in savings accounts, invest in equity portfolios, or back government bonds, whilst taking advantage of ISAs and pensions to ensure that our future selves are looked after. Then came COVID-19.
While stuck at our computer screens, we’ve seen the global economy quake under the pressure of supporting this challenging new way of life, and we’ve all felt the consequences. Savings rates have been dropped, equity portfolios have tanked, and bonds have switched to negative yields. Now that we are poised before potentially the greatest recession of our generation, where is the opportunity? How can we protect ourselves from even greater financial risk?
Make no mistake, there will be opportunities. As the office lights begin to be switched back on all over the world, everyone will be looking for the upside. Maybe you got lucky and owned shares in a company which answered the growing demand for PPE, but for most it won’t be that easy. While savings accounts and bonds pay out close to nothing, and the price of stocks being as unpredictable as ever, there must be a way of earning decent returns while not exposing yourself to the obvious recession risks.
It goes without saying that this isn’t the time to be making speculative investments; we’ve already seen the damage done to cyclical sectors like travel and leisure as a result of the lockdown. This could however be the opportune moment to invest into businesses. We’ve already seen through the release of the Government’s CBILS scheme that SMEs are eager to raise funds. Once their supply chains and operations are no longer impeded by the lockdown, we may witness a boom of activity, and the savvy investor could stand to take advantage. Provided the business has a strong balance sheet, is not too highly geared, and doesn’t rely on industries still impeded by the COVID-19 crisis, there are returns to be made.
Take ArchOver’s platform for example; investors are able to read up on different credit approved SMEs looking for funding. They can find out about a business’ operations, its management and, most importantly, its financials, in order to make a well-supported decision over whether or not to invest. If a particular offer is to their liking, they could stand to earn as much as 10% per annum in interest. In some cases, these businesses are already backed by the Government through various grants and claims based on their innovative work.
When the traditional assets have failed, it’s time to look toward something new.
Your capital is at risk and interest payments are not guaranteed if the borrower defaults. Historic loan default rates are not necessarily indicative of future default rates. Lending over the ArchOver platform is not covered by the Financial Services Compensation Scheme.