Right now I am sure a lot of you guys are worried about your investments. Whether you started investing recently, years ago, or are wanting to get started there is a lot to consider. For the first time in over 10 years we are entering bear market territory, and for new investors that can be pretty terrifying. You may be questioning your recent investments, or wondering if you should take out a second mortgage to plow capital into the markets. You may also find yourself asking if now is even a good time to invest, or should you wait out the bear market. Unfortunately the answer comes down to your risk tolerance and what you personally feel comfortable with.
Currently at the time of writing we are midway through the market crash of 2022, and a lot of great opportunities are popping up. Whether you invest in growth stocks, dividend stocks, or index funds there are a lot of great buys right now. So that brings the question, “is now a good time to invest?” And the answer is absolutely!
Warren Buffet, one of the most famous investors of our time once said. “Be fearful when others are greedy, and be greedy when others are fearful.” That is a quote that you should always keep in mind. During our current bear market their is a lot of fear about inflation, our economy, and the crisis in Ukraine. But regardless of what the leading fear is for your market its important to remember that it will pass. The only two reasons that it doesn’t make sense to invest are either you don’t have faith in the economy, or you can not afford to lose the money your investing.
Now is not the time to purchase meme stocks off the wall street bets page though. You want to make sure that you are buying quality companies that have a good chance to make it through what is most likely our next recession. Assuming you want to invest in individual companies. Now lets assume that you are an index fund investor, or contribute heavily into your 401k. You should just continue to invest as normal, maybe invest a little heavier to take advantage of the discounted prices.
For new investors its important that you are starting in a much harder market. With the fed raising the federal funds rate, the cost of borrowing is going up at a fast pace. A much faster pace than we have seen for the last 15 years. This is going to increase the cost of borrowing for everyone, including businesses. If you are just entering this market I would encourage you to look heavily in proven funds that are currently on sale. Potentially picking a handful of companies that you personally like and believe in. But you need to keep in mind diversification. Whenever you put money into the stock market its important that money doesn’t matter to your daily life. if you are putting next months rent money in your account, then you need to really consider getting yourself into a better financial position before you invest. You should only be investing extra funds you have. This is money that if it goes up over the next 5-20 years then great, if it goes to 0 then you won’t lose any sleep at night. The equities market is very unpredictable, and you should never bank on it for your next paycheck.
Personally I am investing heavily in tech/growth companies that I believe will come out of this bear market. I use what is called the wheel strategy, which you can read more about here. For me, this allows me to purchase riskier positions that I’m confident in while also slowly pulling my initial investment out. I know that within a few years, even if the stocks goes down dramatically, I will have my initial investment out, and most likely moved to another position. There are countless strategies that you can learn about, you just need to find what works for you. Just remember to keep investing!
