Investment Strategies in Long Recovery Economies

It’s hard to invest when markets have been recovering for many years; Image Credit: PixaBay

Some of our readers will have been trading during the Global Recession of 2008, but most will have come of age in an expanding economy. We’ve definitely enjoyed the post-Recession economy, but a growing number of analysts are worried that the party may soon be over.

The culprit could be come from almost anywhere. Chinese housing crisis? Flagging American tech stocks? International trade wars? Turmoil within Brexit and the EU? Despite major stock gains in 2018, any investor has to be worried that our end-of-summer markets are looking a little vulnerable.

So how do you invest when you’re worried that prices might drop in the not-too-distant future? Well, the answer depends on your goals, risk tolerance and knowledge.

You Can’t Time the Market… Except When You Succeed

Long-term investors will almost always tell you that trying to time the market (selling right before an anticipated crash) is almost never a good idea. Many equity investors use dollar-cost averaging to make sure that they’re always putting money into the markets, no matter what prices are doing at any given time.

This “time in the market beats timing the market” approach tends to work well, especially if you’re planning to stay invested for decades. This way, even if things go south, you’ll have ample time to recover. However, if you’re older (or 100% convinced that a crash is coming soon!) then, selling or re-allocating your portfolio to more stable assets like bonds and treasuries may be what’s right for you. Who knows, you might get it right.

Short selling works well for some savvy investors; Image Credit: Short Selling by Nick Youngson (CC BY-SA 3.0Alpha Stock Images

Learn to Short Like a Pro

Of course, buying assets isn’t the only way to invest. People who know how to short positions using CFDs and other methods can make money in any financial climate. They buy winners when prices are going up and bet on the decline of losers in bear market conditions. Becoming a day trader isn’t for everyone, but if you wish to be a professional investor (or even a fairly decent investor), learning to short will give you another arrow in your quiver.

Cash Might Be Your Best Friend

If you simply can’t abide by investing in a market that might be near its peak, consider saving up your cash reserves. Cash is great because it still works even after a financial crash. In fact, cash comes in handy in these settings, because you can buy up all of your favorite stocks and other assets at deeply discounted prices. Professional investors the world over are increasing their cash positions in today’s climate and it probably wouldn’t be a bad idea to do the same.

No one can predict the future of equities markets. Always do your own research and consult experienced minds, when in doubt. Stay the course or find a new strategy, but whatever you choose, we wish you the very best of luck!

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