Nuthawut Somsuk/Getty Images/iStockphoto
With high inflation and a choppy market, it can be difficult to find the best things to do with your money.
“In times of economic downturn, it can be tempting to sell your investment and keep cash reserves – but that’s rarely a good idea,” said Thomas Kralow, a self-made millionaire and founder of University-level business education. “Holding cash makes you lose money as inflation eats away at your savings day by day.”
Find: 10 US cities with lots of jobs and cheap housing
See: 3 things you need to do when your savings hit $50,000
The smart move is to stay invested, Kralow said.
“Instead of trying to time the market, stick to a long-term investment plan that matches your risk tolerance, goals, and time frame, and never stop exploring your options,” he said. he declares. “If this strategy works for the most successful investment firms in the world, why wouldn’t it work for you? »
As to where to invest your money in times of economic downturnKralow recommends focusing on these six strengths.
Basic Consumption Actions
Consumer staples stocks are investments in direct-to-consumer companies that sell essential goods such as food, beverages, and household and personal care products.
“The logic here is simple: they’re always in demand,” Kralow said. “Even in an economic downturn, people don’t stop buying the essentials, so the companies that sell them are much less likely to see a drop in revenue.
“Additionally, publicly traded companies that sell consumer staples are often well-known legacy companies with a long history of success,” he continued. “They have a large market share, limited competition among companies of their size and stable prices – which is important in a recession when consumers are most sensitive to price changes.”
Kralow particularly recommends Coca-Cola, L’Oréal and Walmart. “These are great brands that have been around for decades and have comfortably survived whatever the economy has thrown at them so far,” he said.
Take our poll : Do you think AI will replace your work?
Gold and silver generally resist market downturns, Kralow said.
“Precious metals are often seen as a smart investment because the decades of data we have show that they tend to retain or increase in value, even in times of economic uncertainty,” he said. “That’s largely because they’re not tied to the financial stability of any particular currency or country, allowing investors to hedge against inflation when times get tough. In addition, precious metals are rare and difficult to extract. We can’t just turn on the printers and create more like we do with cash when the supply is insufficient. Thereafter, as more people buy and hold, the rarity increases and their value tends to increase over time.
There are several ways to invest in precious metals.
“Buying physical metals in bars or coins is an option, of course, but then you have the problem of storing it, insuring it and keeping it safe, which comes at a cost,” he said. Kralow. “Instead, you can buy exchange-traded funds (ETFs), which allow investors to add precious metals to their portfolio without having to physically buy, store and resell them.
“Mining stocks are another alternative,” he continued. “While some ETFs directly track the price of the underlying metal, mining stocks allow you to invest directly in companies engaged in the exploration, development and production of precious metals. which allow multiple investors to pool their money and invest in a variety of precious metals securities, including stocks and ETFs.These funds are generally expert-led and offer access to trading opportunities. investment that are not generally available to individuals.
Health Sector Actions
“Like basic consumer goods, there are also basic services without which we simply cannot survive, and health care is among the most essential,” Kralow said. “People need medical care, medicines and services, regardless of the state of the economy.”
Many stocks in this sector have been boosted due to the COVID-19 pandemic.
“The COVID crisis has made healthcare innovation an even bigger priority globally and as a result, healthcare stocks appear to be a safe bet in the long run,” Kralow said. . “Moderna – the company behind the well-known vaccine – was priced at $22 per share in 2019. Today it is around $140. Other examples include Pfizer, Johnson & Johnson and AstraZeneca. However, never forget the history of Theranos and never blindly follow the buzz. Always do your research and rely only on hard evidence of a company’s success.
Bonds are very low risk investments.
“Government-backed bonds offer a steady return that offsets equity price volatility,” Kralow said. “Given the minimal risk, bonds tend to outperform other types of investment during downturns. Not only do they provide a relatively safe investment, but also a steady stream of income in the form of regular interest payments. They are also very liquid, which means they can be bought and sold on the market quickly and easily.”
However, there are a few things to keep in mind.
“Although government bonds provide a steady stream of income, they generally offer lower returns than other types of investments,” Kralow said. “Interest rates paid by government bonds may not keep pace with inflation, especially at this time, and their value fluctuates with changes in interest rates. When interest rates rise , the value of existing bonds may fall.
Crypto is a “high-risk, high-reward investment” that Kralow recommends having in your portfolio.
“They are similar to precious metals in that they are not controlled by any government or central authority, which may make them less vulnerable to economic turbulence,” he said. “Likewise, their supply is limited and, as we know, scarcity is a great driver of value.”
However, since crypto is volatile, do not invest everything in this single asset. It is also important to be strategic about the cryptocurrencies you invest in.
“Given the ongoing crypto winter and the risk of recession, the bear market could still be an issue in 2023,” he said. “The safest way to invest in such a volatile market is to choose blue chips such as Bitcoin and Ethereum, as lower cap altcoins are at greater risk of financial collapse. We have seen the values that crypto can reach, so the bear market is the perfect time to buy low. In the long term, when a new growth cycle begins, these investments should offer the greatest rewards.”
Investing in yourself will always pay off.
“The knowledge and experience you have will stay with you for the rest of your life, helping you thrive regardless of market circumstances,” Kralow said. “Investing in courses, mentoring and networking will help you avoid costly mistakes and open up new opportunities for you. In the long run, this investment will help you minimize your losses and increase your profits.
More from GOBankingRates