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How to invest during a recession
 

Most Americans have felt the effects of this current recession, whether it is job loss, a fruitless job market, or the difficulty of trying to make ends meet. So what can you do to secure your financial future? The following tips will help you and your family survive and save money during these tough economic times:

  • Don't cut back on your 401(k). Despite the fact that you probably took a hit over the past year, your plan should recover at some point. If you are fairly confident your employment situation is secure, continue investing in your 401(k) or other employer-sponsored retirement plans. The tax advantages of these types of plans make them ideal savings vehicles for retirement.
  • Diversify your investments among a wide range of stocks, bonds, certificates of deposit and other securities. Ask yourself whether you would be extremely impacted financially if the value of your stocks and bonds declined and didn’t recover. If the answer is yes, you probably need more diversification. Diversified portfolios include a combination of more aggressive investments (which carry higher levels of risk) for growth as well as safer vehicles that typically offer lower yields. Diversifying does not guarantee a profit or protect you against loss, but it can give you more leverage and chances for success.
  • Think long term. Your investments may have lost 30 percent to 40 percent of their value since October 2007, but quality investments often need much longer periods to show significant growth. So while it can be painful to endure short-term losses, you need to develop the discipline to hold your investments for many years.
  • Look for good investment opportunities. Because the prices of many securities have fallen so much, you could now afford to buy more shares. Historically, buying shares at lower prices has often led to higher returns over the long term.




Posted:11/16/2012
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