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
Consult A Wealth Coach
Understand the Value Of Consistency
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.