Do you think we are entering an economic depression? Absolutely not! We are far from the 1930’s and there is no way we are reporting anywhere near the 10% decrease in real economic growth which would classify as "depression". However, for the little guy out there, the pain has left a mark. The worry is written all over his forehead. So what must you do now? Any pointers on Investing in an economy like this? Here they are:
1. Don’t time the markets, but NOW is better than any other time: One of the fundamental tenets of investing is that you must never try to time the market. But given that the stocks are cheap and battered; long over-due and have shed off all the extra weight, it is time to go grab them. Not that you are timing the markets; it’s just that you are buying when they are affordable and cheap.
2. Fundamentals Still make for sensible Investing: The investing greats have always been saying this - times like these will come and the economies of the world will swing wildly and hence an intelligent investor can only depend on his acute sense, knowledge, experience and competence when it comes to investing. Pay attention to the fundamentals -- read the financial documents, understand and dig into the management style (methods); ascertain demand for the said companies you are going to invest in, etc.
3. Don’t forget the Pyramid; you’ll need a Strong base more than ever: Debt markets should never be ignored. Even for the most aggressive investor who has tons of risk-appetite, it is a must to have a solid foundation of liquid cash and some amount of it in money markets or debt markets to give you that required cushioning when markets plummet to levels we can’t stomach.
4. Diversify - It is even more important now than ever: You’d have heard it a million times by now, but it is exactly for times like these that calls for diversification. Perhaps a simple act of buying a well-diversified, good performing Mutual Fund might do; head off into other areas you haven’t though of like bullion markets; international investing; Forex investing, etc.
5. Be Optimistic: There is a reason why you being optimistic might just make the economy better. Not that you have magical powers, but then, when you think that the future is going to be better, you will take more responsibility to ensure that happens and moreover, you will protect your today. Make prudent decisions and look for a brighter and more prosperous future.