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How to Invest in a Rough Economy: Investment Advice from the Experts

By Sarah Simmons

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Published: 23Jun2009
Word count: 690
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The stock market crash of 2008 lost many investors a lot of money, and had many other investors bailing out of stocks for the safety of savings and checking accounts, treasury bills and gold. However, it is still possible to invest - and yes, even make money - during the current rocky economy.

The broad decline across financial markets in the past year has persuaded a small but growing number of financial experts and advisers to ditch the traditional buy-and-hold strategy - which promotes long-term investing in a mix of assets - for a new approach that aims to sidestep future market plunges and ease instability.

What does this mean to the common everyday investor? Read on for some investment advice that everyone can use.

Be Informed

First and foremost, the best investment advice you'll ever receive is to take control of your own future. You are the only one who will have your best interests at heart. Even if you do not understand exactly how to invest your money or don't feel comfortable doing it yourself, an investment advice site such as MySMP.com can get you on the right path to getting the right advice and asking the right questions.

Take an Active Approach - Buy and Hold is Out

A common misconception about the stock market is to just "ride it out." Don't sell and eventually your stocks will go back up, right? Wrong! If a financial advisor suggests that you need to take a long term buy and hold approach, you should run. They probably don't understand how to invest the right way and figure that the market will go higher over time. You want to hear answers suggesting that the investment advice you will be receiving is based on a sound understanding of the financial markets; including concepts such as technical analysis and options hedging.

As we learned in 2008, established stocks such as Lehman Brothers and Bear Stearns can go at anytime, so do your research and find out which sectors have the most potential 2-3 years out. These are sure to be your best investment.

Diversify Within Different Assets

Don't put all of your money into stocks, true diversification is asset class diversification; including stocks, bonds, commodities, and currencies to name a few.

401k Plan Investment

Here are a few pieces of investment advice when considering a 401k plan. First, contribute the full $15,500, or deduct 15% of your gross pay, to your 401k plan if you can. This is tax free money, and it's a no brainer. If you cannot make the full contribution, be sure to at least contribute in an amount equal to your companies match. If your company matches 6% and you only contribute 3%, they will only match 3%. If you are coming near the age of retirement and can't afford to lose any more money in your 401k, get out of stocks funds and move your money to money market. If you are not comfortable investing money into stocks, put it into a money market fund within your 401k; the key is not to stop investing.

If you are going to manage your 401k assets, make sure you diversify between different asset classes, if possible. Unfortunately, you are typically limited to stocks and bonds. If you don't have options such as commodities available to you, go talk to your plan sponsor and push to get some more selection. When you leave your company, be sure to transfer your funds to a rollover IRA; you will be able to trade any asset class here.

In Summary

There is no one size fits all answer to investing and you're probably not interested in becoming a full time money manager. Investment advice is always easy to come by but good advice is very hard to come by. The key is to put people around you who have a good track record and know how to invest with capital preservation in mind at all times. Never get involved with people who promise you the world. Odds are they will do well for a while but their ego will eventually blow up in their face.

MySMP, or My Stock Market Power, was created as a financial educational resource to enhance your trading acumen. First created to offer education on day trading & technical analysis, MySMP.com has expanded to include articles on stock trading, bonds, options, futures, forex, and investment advice.

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