How You Should Invest During A Slowdown

It’s easy to get behind the idea of long term investing when everything is hunky-dory but, what do you do when the economy slows down? The dip in GDP and rising inflation have gotten many asking the same age-old question: How should I invest during a slowdown?

 

The answer is as simple as the basic principle of investing itself… think long term.

Going into a slowdown can be scary, especially if you’ve been investing without a wealth coach by your side. Though it is difficult for many to be calm during an economic slowdown, it is crucial to be composed no matter what the economic conditions may be. Broadly speaking, your investment goals, time horizon and risk appetite are things you should have assessed before investing. Assuming that those basics are in place for you, I have three key pieces of advice for you, none of which require any dramatic action. So, if you were expecting a generic call to hold or sell, that is not something I will ever propagate as a blanket statement.

Have A Balanced Portfolio

Balance is key when it comes to investing through market ups and downs. This is why you should have a healthy mix of funds including alternative asset classes in your portfolio. This is a classic way to ensure you don’t have all your eggs in the same basket. I would also warn you against diversifying blindly as that will do you more harm than good. You need to ensure each asset class in your portfolio aligns with one or more of your investment goals. A good advisor will help you achieve this balance and I cannot stress enough on the relevance of genuine and authentic investment advice.

Consult A Wealth Coach

A wealth coach is different from a regular advisor; he or she is not driven by commissions and cuts. A wealth coach, therefore, has your best interests in mind because the only way they get paid is if you gain healthy returns. This will help you realign and adjust course if required during an economic slowdown. Remember that it is perfectly possible that your portfolio does not need any tinkering with through an economic slowdown. In such a scenario a wealth coach will probably advise you to stay on course and at times doing nothing is the best thing you can do for your portfolio. So, make sure you talk to a wealth coach who has solid experience and understands your needs and goals before doling out advice.

Understand the Value Of Consistency

Regular investing helps average out market volatility; which is exactly why SIPs are such a great way of investing in mutual funds. You must, therefore, continue to invest through economic slowdowns because market lows are when wise investor make the most money. It is also the time when you will make up for the times when you invested during market highs. Stopping your investments or reducing them during trying times is the opposite of what you need to do during an economic slowdown. An economic is different from a full-blown recession which means the scales will tip to the other side sooner rather than later.

Avoid Volatile Assets & Think Global

Steer clear of highly volatile funds, property, land etc. You need to invest in assets that will give you long term returns and steer clear of high-risk investments that can potentially lead to big losses. You may also have noticed that a global economic slowdown is rarer than a country or region-specific economic slump. This means you still have economies around that world that are booming… the question is are you investing in them? Investing in US Equities, for example, is something that can help you hedge against the depreciating value of the rupee even when things seem gloomy in local markets.

At the end of the day, you need to remember that saving is as important as investing during economic slowdowns. Curb your discretionary expenses, avoid eating at expensive restaurants and try to temporarily live within or below your means. That said, if you look back you’ll notice that a global economic slowdown is rare and doesn’t usually last beyond a few months. There are many measures world economies put in place to avoid such a situation. If and when the winds do get rough, sometimes it’s a good idea to let your sail down and coast through to the other side instead of fighting the tides.

Want to start investing?

We know it’s a big decision to start investing, to change advisors or to try new investment options. That’s why we give you the option of a free personal phone consultation.

Subscribe to our blog

Top Posts

The New Normal

Written by Siddhartha Rastogi (MD – Ambit Capital Pvt Ltd) Was Nature preparing humanity to social distancing? Was rise of Novel Coronavirus or

Read More »

Book your free phone consultation

Submit details to get started