Financial Independence
Escape the Rat Race
Investing in a Recession >
This article is about what I would do (and am doing) with my finances in this recession.
You agree that you are solely responsible for your own investment decisions.
You agree that you are solely responsible for your own investment decisions.
In December, 2008, we can see the major stock market indicators drop and drop.
Investors and employees heard today that the US is in a recession (and has been
since 2007). People investing for retirement are very worried about their IRA’s and 401
(k)’s.
So to answer your question about what should to invest in, I will give you some ideas.
First, I would consider bonds; especially US government bonds (T-Bills). These
should rise in value, and pay a small amount of interest.
Second, consider gold and silver. You can buy gold through any brokerage by ordering
“GLD” through your account.
Third, consider PASDX (PIMCO All Asset). PASDX invests in commodities, stocks,
government bonds (including governments of other countries), REITs, and corporate
bonds. This investment has held up pretty well over the last few months.
Fourth, you could consider “puts” in stocks you think are going to get clobbered. “Puts”
are options to sell short. Sell short means to bet a stock will go down. If the stock
goes up, you lose the price of your option order.
If selling individual stocks short is not for you, consider a mutual fund that sells short
(like BEARX). There are a number of bearish mutual funds, and there are funds that
are long, short, with different asset classes, etc.
The thing I would do is keep researching stocks. Investigate and evaluate blue chip
companies, and other individual stocks that are getting lower in price. The idea is to
buy when the outlook of the economy and your given investment idea is very bleak. If a
company you think is great is at a multi year low, buy some, and hold on. If it goes
down more, buy more. The lower the price to earnings ratio (P/E), the better for you.
If you have a 401(k), you may need to petition for more investment options. Many 401(k)’
s have very limited selections. Ask your employer for bearish funds, specialized funds,
more diversified funds, etc. If you leave your company, rollover your 401(k) to a
traditional IRA.
Here is something to consider. If your stocks drop 80%, what percent return will it take
to break even? One good way to avoid huge losses is through asset allocation.
Asset allocation is a huge term you need to know. You need to decide on an asset
allocation that is right for you. You need to diversify out of stocks, to some extent.
Speaking for myself, I cannot be 100% long in equities, right now. But I do plan to
scoop up bargains over the next 1 to 3 years. (Maybe longer!)
Recessions normally last one to three years. There are sometimes “dead cat
bounces” in the markets too. An advanced investor can profit from them.
Be careful with predictions by economists and gurus, and even me. You may need an
excellent stock broker or financial planner to help you. If you know a person with a
good broker, get the name of the broker and the firm, she works for and do a
background check. These steps help a lot, but there is always risk.
Be certain to visit the money saving ideas page at this site. You have no excuse. I bet
you can save more money than you think. The ideas mentioned in the section called
“Getting Started” still largely apply, and I think they are pretty good too.
Avoiding debt is a great idea in this environment too. Anything you can do to generate
extra money would also be helpful.
Try to remain as positive as possible during recession and financial crisis. You do not
have to be glued to the TV. Any steps you can take to insulate yourself from the
economic environment would be good.
Be advised, I am not a stock broker, financial planner, or certified councilor.
Investors and employees heard today that the US is in a recession (and has been
since 2007). People investing for retirement are very worried about their IRA’s and 401
(k)’s.
So to answer your question about what should to invest in, I will give you some ideas.
First, I would consider bonds; especially US government bonds (T-Bills). These
should rise in value, and pay a small amount of interest.
Second, consider gold and silver. You can buy gold through any brokerage by ordering
“GLD” through your account.
Third, consider PASDX (PIMCO All Asset). PASDX invests in commodities, stocks,
government bonds (including governments of other countries), REITs, and corporate
bonds. This investment has held up pretty well over the last few months.
Fourth, you could consider “puts” in stocks you think are going to get clobbered. “Puts”
are options to sell short. Sell short means to bet a stock will go down. If the stock
goes up, you lose the price of your option order.
If selling individual stocks short is not for you, consider a mutual fund that sells short
(like BEARX). There are a number of bearish mutual funds, and there are funds that
are long, short, with different asset classes, etc.
The thing I would do is keep researching stocks. Investigate and evaluate blue chip
companies, and other individual stocks that are getting lower in price. The idea is to
buy when the outlook of the economy and your given investment idea is very bleak. If a
company you think is great is at a multi year low, buy some, and hold on. If it goes
down more, buy more. The lower the price to earnings ratio (P/E), the better for you.
If you have a 401(k), you may need to petition for more investment options. Many 401(k)’
s have very limited selections. Ask your employer for bearish funds, specialized funds,
more diversified funds, etc. If you leave your company, rollover your 401(k) to a
traditional IRA.
Here is something to consider. If your stocks drop 80%, what percent return will it take
to break even? One good way to avoid huge losses is through asset allocation.
Asset allocation is a huge term you need to know. You need to decide on an asset
allocation that is right for you. You need to diversify out of stocks, to some extent.
Speaking for myself, I cannot be 100% long in equities, right now. But I do plan to
scoop up bargains over the next 1 to 3 years. (Maybe longer!)
Recessions normally last one to three years. There are sometimes “dead cat
bounces” in the markets too. An advanced investor can profit from them.
Be careful with predictions by economists and gurus, and even me. You may need an
excellent stock broker or financial planner to help you. If you know a person with a
good broker, get the name of the broker and the firm, she works for and do a
background check. These steps help a lot, but there is always risk.
Be certain to visit the money saving ideas page at this site. You have no excuse. I bet
you can save more money than you think. The ideas mentioned in the section called
“Getting Started” still largely apply, and I think they are pretty good too.
Avoiding debt is a great idea in this environment too. Anything you can do to generate
extra money would also be helpful.
Try to remain as positive as possible during recession and financial crisis. You do not
have to be glued to the TV. Any steps you can take to insulate yourself from the
economic environment would be good.
Be advised, I am not a stock broker, financial planner, or certified councilor.
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