If COVID and the recent war have taught us anything, it is to invest in essential services stocks that are weather-proof and above macro-economic conditions.
As an investor, you need to ensure that you are picking the right stocks to buffer your portfolio against losses. Your investment manager might choose a mix of stocks that respond to market conditions in similar and polar ways.
However, to truly shield your portfolio against market ups and downs, you need stocks that are not only profitable but are least volatile in market storms. And what better than essential services stocks to truly fulfill this agenda. Essential services will always have a mass demand, and hence, the stocks are not only stable but also yield consistent returns.
Read on as we make a case for including essential services stocks in your investment portfolio
1. Earn solid and stable earnings
The vast majority of essential services face constant demand along with a stable regulatory environment. These stocks are well-positioned to generate reliable profits and cash flows.
The urgency of these services thereby stabilizes the stocks, no matter the economic conditions.
The growth of essential services is also less subjected to market conditions and more subject to the innovations that are needed to maintain a constant supply of services to the public.
2. Get protection against inflation
Regulators allow essential services industries to raise their prices and stay afloat with the rate of inflation. The reason for this is that regulatory bodies want to account for the budget that will ensure consistent production for a long-time.
This makes essential stocks not only safe and profitable but also a good option for long-term investments. Not only will you be able to toss your worries about risks and losses but also inflation-proof your portfolio.
3. Lower risk of capital loss
Even when the markets decline or global turmoil takes place, the governments make sure that the essentials are safeguarded. The macroeconomic preparations of safeguarding essential industries will help investors in every market decline to protect their capital.
4. Earn by doing good
Investing in essential services stocks is investing and supporting the companies that fulfill the basic and essential needs of society. Hence, in addition to a sturdy portfolio, you will also get a sense of personal fulfillment that comes with contributing to everyone’s survival.
You can pick and choose the essentials that you are most passionate about and invest in them to earn profits as well as contentment.
5. Adversity proof
When the stock market started moving with the news of global health hazards, investors started looking for pandemic-proof stocks. Unfortunately, due to the aggressive nature of the pandemic, there were hardly any industries and stocks that were completely shock-proof.
And the ones that were doing well were essential services stocks. The biggest reason for such resistant nature of essential stocks is that these stocks are not majorly driven by the market conditions but depend on their need in the larger society.
How to decide on the best essential services for your investment portfolio
The pandemic has proven that there are very few industries that manage to stay afloat and resistant, in times of crisis. It is, therefore, necessary for investors to choose their essential stock investment wisely. Here are three major classifications of essential stocks to help you determine which one suits your investment goals the best.
Innovations that are becoming essentials
Innovative breakthroughs are becoming the new essentials. From the internet to modern-day appliances, things that were not around a few years ago have now gained newfound importance in our day-to-day lives.
If you love to explore newer industries, then choosing essential stocks of innovative industries is a good idea. During the pandemic, the remote work era gave rise to cyber security. More and more organizations started using cyber security measures aggressively, and in no time, the industry became one of the essentials.
At ShiftAltCap, our experts have hand-picked the most profitable cyber security stocks that make up 8.4% of our War & Peace portfolio, which is focused on capital growth for conservative investors. Another such innovation that is becoming essential for many industries is data centers, and currently, its REITs make up 15.9% of the war & peace portfolio. These are recession-proof, robust stocks to include as data usage and tracking are only rising today.
You can invest in such innovations that are changing the world and are also fulfilling the essential needs of the modern world.
Investing in utility stocks
Essentials are those that are required for survival. Services like electricity, water, and infrastructure are necessities that can never go out of production. Such essential utility stocks rarely get hampered by adversities, and even if they do, global regulatory bodies are quick to restore the production and their disbursement to the public.
Consumer staple stocks such as food and household products are non-cyclical because they are always in demand. If you are an investor looking to stabilize your portfolio, try diversifying with ShiftAltCap’s war & peace portfolio, which comprises stocks of companies producing consumer necessities and utility products.
Essentials that respond well to a crisis
Resistant stocks are those that not only manage to reduce losses but also earn profits in times of crisis. Stocks that will not get weathered by the adverse global conditions will shield your portfolio returns and give you peace of mind. During the pandemic, health tech became one of the biggest rising stars.
Health tech became essential to not only address the health crisis but also to mitigate the losses accrued by the falling stock market. Essentials that combat such a global crisis are often the ones to sustain their value long after the crisis is over. Hence, such essentials make for a great investment.
Essentials that intersect across industries
Some essentials are required not just by the public but by the industries as well. Disruptive technologies like BigData and AI are becoming essential across industries. These essentials are often categorized as an investment in innovations. However, some innovative ideas end up becoming essential and also a good investment.
Investors who want to invest in upcoming innovations and enjoy the benefits of multi-sector investment can choose such new essentials stocks.
Diversifying has pros and cons, and diversifying with essential stocks has more pros than cons.
If you feel overwhelmed about diversifying your investments, then ShiftAltCap will help you pick from crafted stacks designed by experts. Our #AllEssentials thesis recommends you the stocks that are high in demand and from money-rich companies.
Get in touch with us today and turn your investments into profits without worrying about market headwinds.