2. Close out any positions on margin. Immediately, if possible. 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.
3. A position in gold helps to mitigate the downside. This is something we have recommended for years at 24/7 Wall St., and as we noted recently, the precious metal very soon could be returning to all-time highs.
4. Reinvest all capital gains and dividends. That means making sure that all dividend-paying stock and mutual funds in personal and retirement accounts are coded for that reinvestment. This allows you to buy more shares when prices are hit hard. Most stocks and mutual funds pay dividends on a calendar quarterly basis, so investors have time to make sure their accounts are coded correctly before the second quarter comes to an end.
5. Think about real estate if you have the good fortune to come into a windfall, like an inheritance or something similar. While mortgage rates have increased recently, with the 30-year fixed rate rising to 5.42%, that is still extremely reasonable on a historical basis. Owning cash-generating rental property is an idea that makes sense now. Investors who need to look for stock ideas should seek extremely conservative ones that are not affected as badly by even the worst-case scenarios. In other words, companies that provide goods and services that are needed all the time, like utilities, telecoms, consumer staples, and real estate investment trusts.
The almost 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-careelated, warelated, foreign geopolitical or domestic troubles, or any other issues, that have combined to cause market sell-offs, long-term investors generally always win in the end.
With COVID-19 mostly in the rearview mirror, the economy in reasonably good shape for now and the Federal Reserve finally doing what it should have done when it started raising rates in 2018 before reversing course, things should be brighter by the end of the year. The midterm elections will be hotly contested, and it is possible that Republicans win back the majority in both houses of Congress. That, combined with inflation starting to drop by 2023, and the table could be set for better times in the not too distant future.
Originally posted at 24/7 Wall St.
Sponsored: Find a Qualified Financial Advisor
Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.
