BusinessWeek has some good advice on how to invest during a recession. Their keys:
1. Don't get rattled by the uncertainty.
2. If you trade stocks, be careful how you do it.
3. Diversify, and go international.
4. Defensive moves might help you relax, but they'll probably hurt your returns.
5. Make sure you have enough cash.
I don't do that much differently when I invest -- no matter what's going on with the market/economy. I believe in the long-term potential of the United States financial system and I have a long-term investment horizon. As such, I keep investing regularly, month after month after month, no matter what. The only thing I try to do a bit different in tough times is to put more money into the market. Usually, I don't have cash on the sidelines to buy much more, but since I've been saving for a new house downpayment (and actually had more saved than I need), I had some extra around this time to pour into the market.
The part of the BusinessWeek article I like best is the following quote:
The stock market is a great place to make money over the long term. It has a great record of building fortunes after decades of saving and investing. If you're a long-term investor, you don't need to care where the market is right now. Rather, you should care about where stock prices will be five years, 10 years, or more into the future.
Yep. I'm 100% with them.
Of course, you could always ignore this advice and do the opposite -- helping to ruin your portfolio. ;-)
I believe it is ALWAYS a good idea to have a little cash on the sidelines (maybe 10%-20%). This allows you to puth this cash to work as we see market corrections (say a 10% dip). Then when the market rallies, take a little off the table back to 10%-20% cash. You will alway be 80% invested and if you consistently put more cash to work when everyone else is selling and take some off the table when others are buying, your chances of improving your returns are great.
Posted by: Tim | February 27, 2008 at 09:45 AM
I woulkd have to say for those who have time before they need to cash out investments, recessions can be a great thing. Why? They provide plenty of opportunities to buy on the low side.
Posted by: Robert D. Ashby | February 27, 2008 at 10:04 AM
Hi,
It's all depends how" deep is your pockets ".How about you have stocks like AIG ML Lehman etc for banking sector . are you still keep on pouring your money in .
Dollar average trading style seems no good of general public lah
Good luck
Posted by: Eric | September 25, 2008 at 08:39 PM
should we invest in real estate such residential property, commercial property or land?
Posted by: james | September 26, 2008 at 01:43 PM
I think investing in land is a good thing to hedge against current market conditions.
I have been following a large piece of commercial property with potentially lucrative water resources but it is a little out of my reach.
Posted by: Victor | October 13, 2008 at 11:44 AM
Are you crazy? Land and real estate are terrible investments right now in much of the country. Think how to preserve your savings against inflation and look for real estate that generates positive cash flow.
Posted by: Andy | November 14, 2008 at 01:51 PM
Funny, that the same people who were telling us to buy real estate two years ago now advise us that it's a terrible investment right now... Wrong - it was terrible, but now it's time to buy!
Posted by: mamma | November 29, 2008 at 05:42 PM
James, you can invest in real estate. It's got to be in the right area.
Posted by: REBrian | February 16, 2009 at 10:43 AM
True. These tips are very useful. Let me just add. Don't spend more than what you earn.
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