If you’re an investor, you may be anxious about what that could mean for your money. While it may be a time to cut back in some places, there are situations where investing more during tough economic times could pay off.
According to Marguerita Cheng, a Certified Financial Planner and CEO of Blue Ocean Global Wealth , it’s paramount to understand the importance of time in the market rather than try to time the market. In other words, a strategy to take during a recession would be to analyze your investments based on how long you’ve been investing and how long you plan to continue rather make immediate decisions based on what you think the market is going to do.
Cheng added, “One way to ensure that you can maintain your investment and retirement savings plan is to make sure you have adequate cash reserves so you don’t find yourself having to sell at an inopportune time.”
Diversification can be another important investing strategy to help you during a recession.
Cheng pointed to a recent example where a client reached out to her with concerns about his portfolio.
“He felt that his portfolio was too conservative because I included both growth and value,” she said. “One month later, he understands why both are in his portfolio for diversification.”
Consider Dollar-Cost Averaging
Cheng said some people mistakenly assume they need to be rich to invest. But she said you can build wealth through investing if you have discipline, diversification and dollar-cost averaging.
“Dollar-cost averaging is a strategy that involves investing a predetermined amount on a regular basis. In fact, many people take advantage of this strategy through their employer-sponsored retirement plans,” Cheng said.
The benefit of dollar-cost averaging is that you buy more shares when prices are low and fewer shares when prices are high.
Look at Reliable Companies
Brandon Gregg, a financial advisor and market president with BBK Wealth Management , suggested one investment strategy during recession is to invest in reliable companies that pay dividends and have strong track records.
“The hope is that these companies can weather the storm of an economic downturn and continue to provide income to the investor,” he noted.
Gregg said that if your financial situation is strong, recessionary times may bring buying opportunities because prices across the markets are considerably down.
Stick to Consumer Staples
Another investment strategy Gregg recommends for recessionary times is to look at companies that provide consumer staples. These are essentials that could include food, utilities and healthcare.
“They have a proven history of weathering recessionary times,” Gregg said. “Whether markets are in good or bad shape, these sectors of essential products and services will still be needed.”
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