Right now, the world is facing inflation; Covid-19; wars; trade tensions; ups and downs in interest rates, currency exchange rates, and commodity prices; as well as an ever-evolving political, economic, and social climate.

So, is it still relevant to invest during tough times? Some react by not investing altogether, although this approach is akin to an ostrich burying its head in the sand.

While the public today is more aware of the importance of investing, what might be lacking is a plan to navigate the stormy seas affecting markets.

There are two broad approaches to such navigation, stemming from different beliefs on how to invest.

Approach 1: Market predictions

This refers to investors who believe wealth is about making more money. To them, whether they invest in stocks, properties, ETFs, cryptocurrency, et al, they consider it a good investment as long as its price appreciates. If the price falls, it is deemed a failure.

Hence, they tend to invest during good times when prices of investments rise in line with optimism. Conversely, they avoid investing in times of difficulty due to falling prices. Some might even sell off part of their portfolio owing to a pessimistic outlook.

How do they know where the market is heading? The answer is to predict and speculate. The more sophisticated investors will check on macros and technicals. In essence, they always try to find the “best time” to invest or to dispose of their investments.

If you are in this group, you will always be on the lookout to see if today or tomorrow is the “better time” to invest. Even after you have done so, you will always be wanting to know when the “best time” is to sell.

Approach 2: Income productivity

Unlike the above, this group of investors believes wealth is about owning assets that are income-productive. Thus, the measure of investment success is based on how much income is produced by these assets. The more it generates over time, the more successful the investment.

This group is focused on the assets’ fundamental qualities. They want to know if it can generate increasing income in good and bad times, regardless of whether the stock market, economy, the ringgit, and interest rates are going up or down.

What matters is this: is the asset in question profitable and sustainable in all economic conditions, especially tough times?

By focusing on income productivity, this group tends to invest differently from the other. First, in good times when prices are rising, they face difficulty finding income-productive assets at attractive prices. As such, they tend to invest less when things are smooth-sailing.

But, in tough times when asset prices are falling, this group has an easier time locating such assets at discounted prices. Hence, they invest more when the going gets rough.

If you are in this group, you have less tendency to speculate and predict. Instead, your focus is on the asset’s fundamental qualities and its valuation.

So, back to the original question: should you invest during tough times? The answer lies in your belief system when it comes to investing.

Personally, this writer’s approach is to focus on accumulating fundamentally strong stocks with attractive valuation, holding to the notion that wealth is more about income productivity than on rising and falling prices.

This article first appeared in KCLau.com. Ian Tai is a financial content writer, dividend investor, and author of many articles on finance featured on KCLau.com in Malaysia, and ‘Fifth Person’, ‘Value Invest Asia’ and ‘Small Cap Asia’ in Singapore.