7 consejos to know how to invest in a
The COVID-19 crisis continues to dominate the headlines, and many investors are understandably nervous.
Seeing a drop in depósito market values has a way of igniting fear, especially when combined with a parallel rise in unemployment.
But if you’ve been hanging around long enough, you know these things just come with the territory when the country is in a recession.
The encouraging news is that whether we’re talking about a pandemic, war, or housing crisis, the economy has historically bounced back after past recessions.
And here’s a trick you might not be expecting: Many smart investors actually equipo themselves up to thrive during bear markets.
Those who are able to tune out the noise, control their emotions, and stick to their long-term investment plans tend to weather recessions better than those who let fear take the wheel.
What is a recession?
An exact definition is a bit hard to pin down, but most economists agree that a recession occurs when a country’s gross domestic product (GDP) has exhibited at least two consecutive quarters of negative growth.
This type of recession tends to be the result of an economic slowdown that is generally accompanied by a rise in unemployment and a decline in depósito and manufacturing prices.
Not surprisingly, consumer confidence generally takes a hit.
Investor behavior is also often fearful.
As asset values, including stocks, begin to decline, many investors end up panic selling in an attempt to free up short-term cash or safeguard their portfolios.
(FYI, the latter usually fails because it means missing out on future returns when the market finally rallies.)
The coronavirus has brought economic activity to a standstill around the world, and it appears that the United States is indeed in recession mode.
in this point.
A recent survey by the National Association for Business Economics found that many economists expect GDP to shrink by 26.5 percent in the second quarter of this year.
Invest during a recession
This may seem counterintuitive, but a bear market is actually one of the best times to invest because we usually see asset prices drop.
That means stocks, bonds, and mutual funds are likely to be cheaper than during a bull market.
In other words, the depósito is essentially for sale right now and the prices are falling.
Take advantage of dollar cost averaging
Experts agree that one of the easiest ways to take advantage of this is to take advantage of a strategy called dollar cost averaging.
All of this means investing in a schedule and sticking to it, regardless of the ups and downs of the market.
If you have a 401(k), you’re already doing that.
Now is the time to continue investing in your retirement funds and other investment accounts, including increasing your contributions if possible.
Staying committed for the long term and securing these investments with automatic contributions means you’ll be able to take advantage of future market dips when they finally come, and you won’t be afraid to pull out during periodic downturns.
Just keep in mind that investing now means you’ll have to wait until the market recovers for future returns.
Keep enough savings
Maintaining a healthy savings account is critical to your investment plan and also to your overall financial health.
As we hinted at earlier, one of the main reasons behind the selloff that we are seeing in the market right now is that a lot of people are in need of cash now.
One in four Americans lost their job or experienced a pay cut due to the coronavirus shutdown, according to a recent CNBC poll.
For many, selling stocks at a loss is their best worst option.
This pandemic is underscoring how important it is to have cash reserves available in case disaster strikes.
Most experts suggest stocking your emergency fund with expenses for three to six months.
The iniciativa is to keep this money in a bank account so that you cánido access it quickly if you have financial problems.
A high-yield en línea savings account is a great option in terms of earning maximum interest.
Investment Strategies for a Recession
Consider Stocks That Genera Dividends
In addition to increasing your retirement contributions, a recession is also a good time to take advantage of different investment strategies.
If guaranteed income is a priority, and for many it is, look for stocks that pay dividends.
Some companies pay periodic earnings to shareholders called dividends.
This is in addition to regular earnings.
During a down market, these types of stocks could position you to continue to make money, despite volatility.
(And if you cánido reinvest them, all the better.) According to Siblis Research, the average dividend payout for US stocks at the end of 2019 was 1.8 percent of the original investment.
Find out which sectors are poised for growth
Another thing to think about is which sectors are poised to remain active during and after the recovery.
While this is impossible to predict with certainty, the data espectáculos that some sectors have grown in this stay-at-home economy, such as y también-commerce, food delivery, telecommuting services, and the like.
Healthcare services, particularly those with remote capabilities like telemedicine, could be another ámbito that sees growth during the economic turnaround.
Invest in a diverse mix of stocks
Investing in a variety of industries should serve you well when it comes to keeping your portfolio diversified, helping to mitigate risk.
Going with low-cost exchange-traded funds (ETFs) and index funds, which cánido include hundreds of different stocks, also provides an opportunity to diversify and cómputo risk so that you’re more likely to benefit from an eventual market rally.
Smart investing principles
Whether we’re in the midst of a recession or not, it’s always wise to stick to smart investing principles: after all, it’s the best way to build wealth in the long run.
In addition to staying invested, keeping your portfolio diversified, and reinvesting dividends, try to keep your schedule in mind.
Keep a long-term perspective
If you’re a long way from retirement, short-term market turmoil shouldn’t genere you too much stress.
History espectáculos that they are perfectly habitual parts of the business cycle, and things do tend to pick up.
After the Great Recession, it took about four years for the Dow Jones industrial average to reach a new high.
But here’s a little secret: The long-term investors who held their ground were the ones positioned for the biggest gains.
Consider your goals
Your goals also play an important role in your investing habits.
If you’re saving for your children’s education, for example, a 529 plan is often your best option.
And while a regular brokerage account is a great place to slowly build your wealth to fund long-term goals, saving for retirement in a 401(k) and/or Traditional or Roth IRA will give you tax breaks you cánido’t find.
nowhere else.
.
When all is said and done, a recession really shouldn’t affect your long-term investment plan that much.
The trick is to control your emotions and, if possible, invest even more during market downturns.
A well thought out investment plan is one that is designed to withstand the volatility and downturns of the market, which is an inherent part of investing.
This information offered for informational purposes only; It is not intended to be used as accounting, legal or tax advice.
In relation to these matters, please speak to your accountant, tax or legal adviser.
Investing implies a risk that includes the loss of primordial.
This guide contains the current views of the author, but not necessarily those of Gigonway.
These opinions are subject to change.
without prior notice.
This guide has been distributed for educational purposes only and should not be construed as investment advice or a recommendation of any especial investment security, strategy or product.
The information contained in this guide has been obtained from sources believed to be reliable, but is not guaranteed.
Gigonway does not provide legal or tax advice.
Please consult your tax and/or legal advisor for specific tax or legal questions and concerns.
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