Tax season just recently hit the road and this is the time when most people want to dive into the investment scene.
After processing all tax returns, people end up with a bunch of money just sitting in their bank accounts. It is no surprise that people will also like to test the waters and venture towards investing their cash in smart investments. The biggest question we need to answer is, how can we efficiently invest? Let’s find out.
There are times that the stock market hits the phase that most experts called the bear market. It is the time where the industry plunges to the bottom 20% or more over at least a two-month period. This volatile movement of stocks may sound odd or sometimes, daunting to some but that doesn’t mean that we should never invest in something.
Here are some efficient ways we can use our money as an investment during these rough times.
Regardless of the status of the stock market, people should always get a portion of their portfolio in liquid accounts.
Liquid accounts are investment deals with shorter horizons. That means we can get our returns in a short amount of time. In bear market season, this is quite important since we can easily pull out our money in case we found ourselves in a pinch.
Many financial advisors agree that short-term investment moves should lean towards low-risk and low-volatility markets with shorter terms than usual. This option may not give us the desirable returns we look for but it is more stable and we are at least expecting something in return.
Short-term certificate of deposits and market accounts insured by the FDIC or the Federal Deposit Insurance Corporation are viable options for these kinds of transactions. On top of that, we can also look for bonds with shorter terms. However, we need to take note if these bonds are genuinely worth it.
Review Where We Are At And Our Current Status
If we are in the middle of a bear market, we should first check what we can offer to the table before we extend our cards.
Review our portfolio and take time to check if our account provides enough leeway for us to run a couple of stocks or if we could get more bonds. Check our total dollar amount and where our assets sit. Once we got a clear view of where our status at, we can draw out a plan if we need to cut back some of our investments. After all that, we can get enough funds for those long-term investments that will yield higher returns and will set up our long-term goals.
Frequent and Small Bites
Even if we have all the funds in our bank account doesn’t mean that we should place it in our investment portfolio all in one go.
The key to bear market trading is taking small bits over a period of time. We have to understand that stocks during bear markets are virtually in their most volatile state and the most efficient approach when buying shares during this period is not to become an overly aggressive investor.
Spread out our allocation and choose firms with reliable balance sheets with little to no debts on the side. These kinds of companies are in a better position compared to others once the economy bounces back to its normal state. It will also diversify our portfolio and will provide more flexible options in the future.
It is still smart to ride big players but we can also chip in a little in small to mid-cap companies, especially in sectors such as technology and communication. These sectors still offer the fastest growth profile and it might be one of the best places we could start in.
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