Regardless of the type of economy the country is experiencing, it is important to have the proper mix of investments to help ensure your personal financial future. When the economy is in a recession, it may be difficult to make a wise choice since there is so much uncertainty and anxiety in the economic environment.
Before you pull out all your mutual funds, liquidate your properties and get all your money out of the bank and stuff it under a mattress, here are some tips to keep in mind to help you invest wisely during a recession.
- Don’t panic. The worst thing you can do during a recession is to panic. When you operate from fear, it can limit your ability to think rationally and logically. When handling your money, you need to stay calm.
- Stay invested. Resist the urge to pull out your money. Although you may need to reorganize your investments, it still makes sense to invest you money in something that will appreciate in value. For example, you may want to pull some money out of the stock market and transfer it to commodities. You may want to take advantage of low real estate prices and buy investment properties. As long as you select well and choose areas that are most likely to appreciate in value, you may actually end up with a property that will increase in value exponentially in the next few years.
- Stay informed. Read investment magazines and follow the trends. Make sure you understand the economic moves of the government so you know how it will affect your investments. During turbulent times, it’s important more than ever to stay informed. Read the newspapers. Watch the news and economic reports. Make your decisions based on correct information, not because you heard an investor’s tip from your neighbor or some other unnamed source.
- Talk to your financial planner. Talk to someone who knows and understands what’s going on. If you have a trusted financial planner, consider his advice when figuring out what to do next.
- Stay diversified. One way to minimize the impact of the recession on your investments is to have a diversified portfolio. Have a proper balance of low risk investments such as bonds and medium to high risk choices such as science and technology stocks. Blue chip stocks are always good to have in any investment portfolio, but keep an eye on it especially during turbulent times. You may want to start putting some money towards real estate especially since it’s a buyer’s market during a recession.
- Dollar cost average. Once you have chosen your mutual fund or stock, why not dollar cost average. This means you contribute a specific amount of money every month regardless of the price of the stock. When the stock price is low, then you’ll be able to buy more. When the stock price is high, then you’ll be able to buy less. On a given date every month, put in the same amount. This will help take away the guess work of trying to time the market. In the long run, you’ll come out ahead.
Consider these tips when trying to make sense of bad economic times. Stay positive and understand that investments can be for the long haul, so be patient and know that the recession will eventually end. It’s simply all part of an economic cycle, which means that after the tough times, you should start to see an improvement in the future.