The devaluation of the ruble, economic recession, restrictions on free circulation of the US dollar and the toughened sanctions – what strategy should investors in Russia choose amid signs of an upcoming economic crisis which analysts are mentioning more and more often? Vladimir Savenok, investment consultant and founder of the Lichny Kapital (Personal Capital) company, spoke with Invest Foresight on what securities investors should buy in 2019 and whether one should consider investing in gold and property, and, most importantly, in cryprocurrency.
– Many are speaking about financial crisis today. Are there shocks coming?
– One should not fear a market decline; a market disruption is followed by a market growth. The average period of market growth is 9 years, while of decline it is 1.5 years. No one can define the exact cause of the future crisis. Actually, the causes of the crises do not repeat themselves – anyway, I do not I remember such cases. The next crisis will be caused by the things we are not thinking about and do not know.
– What advice would you give to investors for 2019?
– I would advise them redistribute money through investing in short-term bonds and gold – these should be the main assets. As regards stocks, I am speaking of stocks of developed countries’ companies, and I see no reason to abandon these assets. They can constitute up to 60% of the portfolio. Speaking of preferred countries, I would recommend investing 40-45% of the assets in US companies’ stocks, up to 30% in European stocks, and about 20% in Asian market stocks.
– Should one unload developing markets’ stocks?
– I would recommend keeping such stocks at about 4-5% of the portfolio. I am speaking of Latin America countries, China, Russia. As regards China, you should not always trust reports, given the existing large problem with corporate debt.
– Are there any ‘safe’ investments?
– Of course, I would recommend keeping safe assets in the portfolio as well, such as the gold, as well as short-term bonds – for instance, ultra short-term bonds that often have a zero volatility. I would not recommend buying long-term bonds with a ten-year maturity.
– Why bonds and not deposits?
– I love securities because you can easily switch to them. For instance, in case of a market disruption you can promptly sell them and reinvest into stocks. You can respond to any swings in the stock market much faster than to those in the deposit market. If you have, say, a foreign-currency deposit in a small bank with a low interest rate, there is a risk that in case problems arise you will receive your own RUR 1.4 mio ($21,300) only.
– What recommendations can you give to dollar deposits holders in Russia?
– I would advise them to shed such assets. If I had a dollar deposit in Russia I would close it. Maybe I am too cautious, but I would personally switch to other currencies and buy other assets, or even dollar securities. Even in case the United States imposes sanctions and the dollar circulation is restricted in Russia, it will take quite a while for securities to be affected.
– Is it reasonable to consider investing in real estate in Russia?
– Russia has had a vast number of foreign investors; I see no prospects for the market to ascend amid sanctions. The economy has indicated growth over the last quarter, but I would wait until the real property sector indicates a stable growth by at least 10-15%.
– Is it worth investing in cryptocurrency and blockchain projects?
– It is not unless you are a player. Cryptocurrency is a new currency that is not strong enough. As regards ICO projects, you should not even approach them until they get regulated like IPO projects.
By Olga Blinova