A possible recession shouldn’t keep you from investing. The reality is that staying invested may be the best savings tool you have. If you are feeling anxious about market fluctuations and uncertainty, below is a handy guide for how to invest during a recession.
Don’t Try to Time the Market
The key to staying invested during a recession is to not act rashly or based on emotion. That means don’t outsmart yourself and try to time the market. If timing the market was so easy, everyone would do it. Try to time the market and you’ll likely end up losing out on the money you would’ve gained had you just simply stayed invested.
One way to ride out a recession is to make sure your portfolio is diversified. As Money notes, you want to be invested in various stocks, bonds, and funds. If you have a diversified portfolio, when one area is down, another one will likely be up.
When interest rates rise, the value of bonds usually declines. That means now might be a good time to reallocate a portion of your investments to bonds, bond funds, or bond ETFs. In some market conditions, bonds may be less volatile than stocks.
Pad Your Fund
No matter how you plan on investing during a recession, don’t forget about your emergency fund. If you have six months of fixed expenses saved, you won’t be so worried about the ebbs and flows of the market.