Investing During A Recession

This may feel counterintuitive, but a down market is actually one of the best times to invest because we generally see a drop in asset prices. That means stocks, bonds and mutual funds are likely cheaper than they are during a bull market. In other words, stocks are essentially on sale right now and prices are dropping in kind.

Take advantage of dollar-cost averaging

Experts agree that one of the easiest ways to take advantage of this is to leverage a strategy called dollar-cost averaging. All this means is investing on a schedule and sticking to it, regardless of market ups and downs. If you have a 401(k), you’re already doing this. (If you’re an Acorns investor, you’re also doing this if you have Round-Ups or Recurring Investments enabled.)

Now is the time to continue kicking into your retirement funds and other investment accounts—even upping your contributions if possible. Staying committed over the long term and locking in these investments with automatic contributions means that you’ll be able to take advantage of future dips in the market when they eventually come, and you won’t be spooked into pulling out during periodic downturns.

Just keep in mind that investing now means that you’ll have to wait until the market kicks back up to realize future returns.

Maintain sufficient savings

Maintaining a healthy savings account is critical to your investment plan and overall financial health, too. As we hinted at earlier, one of the major reasons behind the massive sell-off we’re seeing in the market right now is that many people need cash now. One in four Americans have either lost their job or experienced a pay cut because of the coronavirus shutdown, according to a recent CNBC survey. For many, selling stocks at a loss is their best worst option.

This pandemic is underscoring just how important it is to have cash reserves on hand should disaster strike. Most experts suggest stocking up your emergency fund with three to six months’ worth of expenses. The idea is to keep this money in a bank account so that you’re able to access it quickly if you’re financially strapped. A high-yield online savings account is a great option in terms of earning the most on interest.

(This article written by: Marianne Hayes)

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