War And Conflict Affects Investments And Investment Returns

There is more than just a cost for the military when there is war. Conflicts in areas across the globe are affecting investments and investment returns.

Conflicts in areas across the globe are affecting investments and investment returns. There is more than just a cost for the military when there is war. Shipping and logistics can be interrupted, and disrupt the regular flow of goods to key economic  regions. This can have an adverse effect on the performance of businesses' profits, and hurt economies across the globe. In turn, this affects investments and investors’ returns.

Because most of the world's conflicts are focused in developing and emerging markets, where manufacturing can be done more cheaply, there is the possibility that a war could affect the supply of important products; and thereby cripple any number of key industries. For example, a conflict with North Korea could prevent the flow of goods from manufacturers in South Korea, China, Malaysia, The Philippines, and/or Vietnam. Such a disruption would certainly damage the performance of the world’s leading businesses - like Sony and Samsung. This will create instability and uncertainty, and further hurt international stock markets.

Aside from the disruption in manufacturing, shipping, and logistics sectors, the collapse of international trade deals and the rise of protectionism will certainly contribute to the threat of inflation around the world.  You can expect that when the existing global supply chains are altered to accommodate protectionist policies, the cost of goods will rise shortly thereafter. With the price of things rising because of inflation, this means that an investor's dollar will not go as far when investment returns are paid.

The deterioration in the value of investment returns will be most worrisome for those investors who are investing and saving for retirement. This is unless investors have prepared for the volatility by investing in income generating investments that supplement their earnings while retired. These investments often pay a monthly dividend at a higher rate of return, to help investors recoup losses incurred from inflation and/or conflict. Because of their important contributions during times of war and conflict,, investors should consider including investments that produce income, as part of a well-balanced, diversified portfolio.