How I'm investing during the Russia/Ukraine War
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The scenario
The Russian-Ukraine war has the world in absolute shambles. Every day there are negotiations between countries that seem to amount to nothing. This was a decision made purely based on the need for power and control, but when it comes to war the reality is nobody wins. Economies are hit hard. Currencies are devalued. The middle class become the lower class and the lower class become homeless. Global trade is halted and most importantly, the loss of human lives.
If you live in Canada or the US, you’ve probably already experienced the effects of this war when you went to fill up your car with gas. I went today and $150 later my gas tank is now only 1/2 full. What a world.
At the end of the day, this war is absolutely tragic and I feel for anyone who has family or lives in the area. If that’s you, I wish you nothing but the best and I hope you and your family are staying safe during these times.
The Economic Impact of the War
Investors have been through a lot lately. First the pandemic, then we had to deal with rising interest rates, then inflation peaked, and now a European war.
These last couple of years have been hectic if you are invested in the stock market. It truly has been a rollercoaster. But as much of a rollercoaster as it’s been, I personally don’t believe it’s any cause for concern.
Let me explain…
Russia is one of the largest reserves for oil and gas, so naturally with war comes a decrease (or halt) in the exporting of commodities to the rest of the world. There have actually been some European countries that refuse to put sanctions on Russia simply because they rely so heavily on Russian oil. Must be nice to have that much leverage.
Luckily for Europe, and the rest of the world, pipelines that supply natural gas out of Russia are still functioning. However, if Russia were to cut off the natural gas supply then we could potentially see even larger effects in the Western hemisphere than we already have. This would create a massive domino effect, increasing prices for pretty much everything. Logistics. Raw materials. Services. Energy would become an even larger expense for businesses and large corporations which would impact their spending on other goods.
How I’m Investing During This War
My short answer: I’m not changing a single thing.
I believe the play right now is to invest in cash-flowing businesses with massive amounts of reserves. Defensive stocks that build infrastructure, create energy, supply food. Invest in companies that produce necessities.
This isn’t the time to be looking for the next Amazon or trying to hit “home runs”. This is the time to double down on high-quality businesses that pay dividends. We don’t know how the market will react to the ongoing Russian/Ukraine war. It could escalate, it could not. For that reason, my strategy is to buy more of my favorite companies at a discount and continue to get paid for being invested in the market.
If you haven’t noticed yet, “growth investors” aren’t saying much right now. Why? Because their portfolios are getting slaughtered. It’s fun having 3000% gains during a market recovery, but when all hell breaks loose, you get left in the dust.
Short-term news doesn’t affect my long-term strategy, and nor should it affect yours either.
With that being said, I do keep some dry powder for economic events like these. And I use that dry powder to take advantage of price swings in the market.
The only stocks that could benefit from this war are oil/gas or renewable energy stocks (as an alternative). Canada, being the 3rd largest oil sands reserve in the world, could see oil prices surge if the war continues to escalate. In that case, there are a select few companies that could benefit from this. I’ll list a few of them below for you to check out.