Sectors including IT and healthcare/pharma have naturally outperformed others in recent years while many others underperformed. In the current climate, investors are exploring safe investment options and are analyzing the choices with less risk than others for fear of further losses in key areas. Certain sectors like hospitality, commercial real estate, banking, automobiles, and energy all have recovery in mind and some will adapt and prosper before others. We aim to establish who will be the most efficient at doing so and where investment opportunities may lie in the years ahead.

The sectors of a country’s economy that seem to be most at risk are the hospitality sector (hotels, restaurants, etc.) and transportation. As speculation intensifies and uncertainty spreads, there will be buying interest in the safer sectors such as FMCG, healthcare, and IT. Therefore, it is advisable for investors to choose sectors with massive growth potential, well-spread market share, and historically consistent profitability.

Let’s examine the likely behavior of some of the most popular sectors for investment:

1. The Aviation and Hospitality Sectors

Aviation was one of the sectors hit hardest during the first wave of Covid-19. When the second wave hit, things only got more grim as restrictions continued to rise. Hospitality fared no better, with people flat out refusing to stay anywhere but their home. In short, the last 18 months have not been good for aviation or hospitality. But as countries continue to loosen regulations and things start to get back to normal, aviation and hospitality will likely both rise back to prominence in the near future. While prices are low, it is a good opportunity to invest in a sector that will not only recover but will likely thrive sooner rather than later.

2. The Healthcare Sector

The pharmaceuticals sector has been one of the top performers in the stock market over the last couple of years. Acting as a savior for investors and bringing substantial returns due to circumstances, there is no sign of the bottom line changing in this area. There are realistic projections that the sector will continue to remain in focus for the foreseeable future. The ever-increasing demand for life-saving drugs, immunity-boosting supplements are all huge factors in this.

3. The Agricultural Sector

The overall impact of COVID-19 on the agricultural sector has been very low. Owing to existing inventories of fertilizers and a strong pre-existing agricultural infrastructure in the U.S., there is likely to be less negative impact on this sector. However, logistics and port clearances across the world have been affected, slowing the transport of many other types of agriculturally useful chemicals. Talking about agrochemicals, companies that depend on imports of raw ingredients as well as exports of finished goods will likely be impacted. Investing in agriculture now as restrictions on ports and travel ease might be a smart move.

4. The Telecom Sector

Telecom has long been one of the most innovative services and sectors for investors to keep an eye on. It has been key in enabling government and healthcare authorities to be able to communicate quickly, track developments, implement work from home, and keep the economy going through recent times. As society continues to evolve and technology advances through another smart revolution, the demand for bandwidth is expected to increase significantly. New and existing customers give investors confidence that telecom will remain among well-performing sectors.

5. The Fast-Moving Consumer Goods (FMCG) Sector

Any uncertainty surrounding the supply of essentials can cause an uptick in spending by consumers on essentials which will boost sales for FMCG companies. This opens up huge possibilities for an investor looking to capitalize on the insecurity of the consumer. Panic buying of commodities can be triggered by media speculation and mass overreaction which can be exploited by shrewd investors who realize there is money to be made whether the rumours are true or turn out to be exaggerated.

Other Considerations For Potential Investment

The automobile industry is one of many discretionary sectors, meaning that vehicle sales largely depend on consumer sentiments. During the first wave of COVID-19, the sector witnessed a steep decline in sales (except for tractors) that continued to experience solid growth.

Now, amidst the uncertain situation, consumer sentiments remain weak and the demand for non-essential items is likely to fall further. The recovery of the sector depends on how fast the world can bring the next wave under control.

Banking stocks will also probably be under increased pressure due to reduced volume of loans under recessionary market conditions. What’s more, it’s likely that a cautious customer outlook will impact the profitability of banks. Also, there will be a decline in banking income due to lower cross-border trade (Travel restrictions, Brexit etc.).

Final Thoughts On Safe Sector Investment Opportunities

In times like these, the investors need to stay invested in strongly performing companies because they are least likely to be unable to survive the continuing storm. Further, investing in equity without doing asset allocation or/and not keeping a separate debt portfolio is like driving at high speed without brakes.

FAQs

How much capital should a beginner invest for the first time?

As a beginner investing for the first time, you can invest as much or as little as you feel comfortable with. Most investment platforms and robo advisors will allow you to start investing with as little as $25 a month, and some even accept $1 a month.

How can I invest with limited money?

Here are some of the best ways to invest with restricted funds:

• Automatic Investing: When you sign up for auto-investing, you give a finance app permission to invest your spare change in the stock market regularly. Automatic investment apps use their technology to estimate how much you can afford to invest and automatically invest it for you.
• Robo Investing: Robo investing is automated financial planning offered by robo advisors. It’s a simple way to invest in hundreds of stocks, bonds and funds directly from your smartphone without dealing with the hassle of picking individual stocks, shares, or other types of investments. You can start robo investing with as little as $1.
• Direct Debits (Regular Investing Service): Most investment platforms give you the option to invest small amounts regularly using their regular investing service. Regular investing dealing fees tend to be cheaper than standard dealing fees. Some platforms don’t even charge a fee for regular investing.

Can you lose more money than you invest?

Yes, you can lose more than the amount of money you invested in the stock market. However, the only time you really lose money in the stock market is when you are forced to sell your investments in bad years. If you can hold on to your investments even when the market takes a hit, things should get better in the following years.

You may also lose money if you choose to invest in only one company, and that company fails. The riskiest thing you could do in the stock market is to invest in just one company. Ideally, you should invest in at least ten companies operating in different sectors and even different regions. We recognise that creating a diversified investment portfolio like this can be quite tricky; that’s why most investors, even the experienced ones, invest in funds.

Can you make a lot of money in stocks?

Yes, you can make a lot of money from investing in stocks, but please remember that the stock market is not a place to create wealth. It is a place to grow your wealth.

It is when you have created wealth that you may invest and grow your wealth in the stock market. Wealth can be anything from $1 to $1 billion or more, depending on your circumstances.

How do I research what to invest in?

There are many ways to research what to invest in. We recommend the following websites for company news, research and commentary: Motley Fool, ADVFN, Hargreaves Lansdown, Interactive Investor, Charles Stanley Direct and Citywire. Additionally, have a look at this Spot the Dog guide by Bestinvest – it highlights underperforming funds that you probably want to avoid.