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Investing During Uncertain Times


Summary

  • Determine your risk exposure before designing your portfolio
  • Stay informed
  • Hold steady and take a long-term view

It seems like every time you turn on the TV there is news of breaking news. There are so many media outlets and online media has also formed a constant contact approach to our news feed. Everyone seems to stay updated with news stories right as they come out.

This constant stream of information can leave a lot of people feeling fearful and therefore not ready to invest, or ready to pull back greatly. If there is international news regarding trade deals this could impact many stocks that have ties internationally (and most do). This makes consumers want to immediately explore safer investments and decrease their risk exposure as much as possible. No matter how much research an investor does, it still can’t stand up to the uncertainty in markets.

Putting your money anywhere comes with a certain level of risk. That is why investments are not Federal Deposit Insurance Corporation (FDIC) insured by banks and any loss is not covered by the bank or institution insurance. It’s a fend for yourself type of mentality. If the topic of a recession is being spouted out to the public, people tend to pull back on their future earnings as the companies cannot predict their futures.

Companies may not meet or even beat their earnings and that would negatively affect the stock price. If your money is invested in that company that did not meet earnings- the price may go down. Most people don’t want to ride the waves of an uncertain stock market due to emotion trading. It’s hard to predict when a recession will end completely or when the economy will kick back up. This results in a sell-off from portfolios that are not wanting their risk exposure to be high.

“The stock market is a device to transfer money from the impatient to the patient.” — Warren Buffett

Stay Informed

The best way to invest during uncertain times is to stay as informed as you can. Making sure that you’re reading news from all aspects and from as many reputable outlets as you can. As an investor, biases can be damaging—especially when it comes to making a potential investment. It’s always a good idea to keep yourself updated on the news that specifically impacts companies, banks, and global trade because they will have the most power over the performance of the market.

Look at which markets have done better during past market downturns and create a plan to move towards better fit funds. When it comes to investing, nothing will pay off more than educating yourself. Do the necessary research, study, and analysis before making any investment decisions.

Markets Fluctuate, Stay The Course

A lot of investors will become fearful and sell a lot of their market positions. They will move their money to safe securities. Bank CDs are a great way to still earn interest for people who want absolute security. Real estate is often a popular alternative that investors become interested in when the market is under performing. When markets stabilize and investors have held onto real estate the returns can be substantial.

On the other side of the spectrum there are a lot of investors that are hopeful for the future and are willing to stick out the hurricane.These are investors that are taking advantage of the unpredictability and using it to their benefit. There may be companies that will rebound after the downturn and their products or services may be on deep discount. Taking this approach is risky but can create returns as the economy stabilizes.

No one has a magic way to predict the future and know where markets will be 5,10, or 15 years from now. The best thing to do is to stay an informed investor. Leverage your resources and positions that may be lucrative when the economy turns back around. There is no right or wrong way to go. Moving money to safer funds and securities is a way to mitigate your own risk and capital. As always it’s important to do research on what will be best in terms of individual risk and reward contingencies.

Investing During Uncertain Times

Quick Quiz

Review and answer these two questions to move on to the next section in the course.

What is a CD?

Wrong answer, please select correct one.

Wrong answer, please select correct one.

Wrong answer, please select correct one.

Wrong answer, please select correct one.

What is the FDIC?

Wrong answer, please select correct one.

Wrong answer, please select correct one.

Wrong answer, please select correct one.

Wrong answer, please select correct one.