Investing during crisis time

During financial crisis time, there is a tendency for investors to switch out of equity to financial instruments that are stable, such as cash, money market, capital guaranteed funds and fixed income. Let's look at these individual financial instruments and see how each of these fits into your portfolio during financial upheaval time.

• Cash -As people says, cash is king. It is liquid and can be deployed at any time. No doubt on that. BUT, sitting on a pile of cash for long term is counter productive as cash hardly generates any income even if we park them in the fixed (time) deposits. Cash can be a good option if your portfolio is mainly consisting of shares.
• Money market funds - this is a better option if you are mainly investing in unit trusts/mutual funds. Money market funds are basically unit trust funds that invest in short term money instruments and are highly liquid. Investors will probably get a better deal than parking their money in savings account.
• Capital guaranteed funds - these are primarily close ended funds which has a small portion in equities. The good point is that you dont lose your capital if you hold through maturity even in the downturn, but do get to enjoy the upswing via the equity portion of the funds.
• Fixed income funds - mainly consisting on bond investments. It's a liquid investments with minimal fees but typically an investor will need to hold the funds for longer terms, such as longer than 6 months to enjoy some returns.

As a general guideline, if you do plan to re-invest in the short term in shares/stocks, you should hold cash, but if the majority of your investments are in unit trusts/funds, you should consider switching to other funds mentioned above.