Best Investments In A Down Economy
If you’re nervous about the market, and have been sitting on the sidelines, here are some ideas for you to choose what could be the best investments for your portfolio. (Note: These are just ideas to consider and not recommendations; any investment decision you make should be based on your personal financial goals and risk tolerance.)
Stocks: When considering stocks, you may want to change your style from a “buy and hold” mentality. Those days are probably gone. The economy is still not on a completely solid footing, so when you buy, you will need to monitor whether your investments continue to meet your goals. Consider big brand name companies, the companies that continue to perform in good times and bad, because consumer are dedicated to purchasing their goods, or the products are necessities. Stick with companies that have a good balance sheet, with low debt and sufficient cash flow.
Bonds: Bonds may be more safe than stocks, but they have risks too. Returns are based on a company’s ability to repay debt, so if a company goes bankrupt, the bondholders are negatively impacted. If you’re thinking about Treasury bills or bonds, note that today yields are very low. Even if you have a measure of safety, you will get lower returns as a result. Check into tax free municipal bonds, government agency and utility bonds, and highly rated corporate bonds. Select bonds issued by strong, healthy companies, or stick with government agencies.
CDs and Money Market accounts: These investments are very much like savings accounts in that they are usually insured (check with the bank you invest with) and offer very low rates in exchange for safety. Because of these low rates, it may be best to invest here only if you are near retirement, or will be paying for college shortly, or are looking for a place to park money while you look for other investments.
There really isn’t a best investment that works for everyone. Whatever you choose in your investment account should be based on your personal financial strategy. Don’t let anyone tell you what is right for you; it has to fit with your goals and your risk tolerance. Spend the time to put together a financial plan, and you can choose your best investments with that plan in mind.
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