- Immediately, if possible, close out any positions on margin. For individual investors to use margin loans to buy more stock is a bad plan when times are good, especially when those margin positions are high volatility momentum stocks.
- As we have recommended for years at 24/7 Wall St., a position in gold helps to mitigate the downside. And as we noted recently, the precious metal could be headed back to all-time highs and going there soon.
- Make sure that all the dividend-paying stock and mutual funds in personal and retirement accounts are coded to reinvest all capital gains and dividends. This allows investors to buy more shares when prices are hit hard. The third quarter is ending, and many stocks and funds pay dividends on a calendar quarterly basis.
- If you have the good fortune to come into a windfall, like an inheritance or something similar, think about real estate. While mortgage rates have increased recently, the 30-year fixed rate has risen to 6.25%, still reasonable on a historic basis, though it is the highest since 2008. Owning cash-generating rental property is an idea that makes sense now.
- If you do indeed need to look for stock ideas, look at extremely conservative ones, which are not affected as badly by even the worst-case scenarios. In other words, companies that provide goods and services that are needed all of the time, like utilities, telecommunications companies, consumer staples and real estate investment trusts.
The 13-year bull market has been a blessing and now may end up being a curse. There were numerous drops and corrections along the way. The fourth quarter of 2018 was a good example, when over a three-month period the S&P 500 declined 18% on an intraday trading basis.
Remember that even the most difficult events in human history and investing eventually have been overcome. Whether it be health care related, war related, foreign geopolitical or domestic troubles or any other issues that have combined to cause market sell-offs.
With COVID-19 largely in the rearview mirror, the economy in reasonably good shape (at least for now), and the Federal Reserve finally doing what it should have done when it started raising rates in 2018, at least some of the carnage may be closer to an end. The midterm elections will be hotly contested, and Republicans may win back the majority in both the House and the Senate. That combined with inflation starting to drop by 2023, and the table could be set for better times ahead.
Originally posted at 24/7 Wall St.
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