In the perils of the recent recession investors across the board have lost millions. After all the portfolio destruction many experts began to question the time old traditions of sound investing. For example, securing portfolios with mortgage collateral was once thought to be one of the most secure protections against the natural fluctuations of the market. Primarily because it was thought people always need a place to live and paying that mortgage is the first bill out of most household budgets. But when the government started dictating who and who wasn’t qualified for a loan, people who didn’t earn a house were suddenly being given the privilege of home ownership. So in the new economy is it time for a new approach? Lets take a look at a few new investment strategies.
First, buy and hold because by 2009 the global economic downturn had evaporated over ten years worth of gains. Keeping investments long term used to be a one way ticket to huge losses. People who held their investments from ‘07 through ‘09 lost, on average, fifty percent. So is this the end of buy and hold?
Definitely not. In all reality, history, over and over, has proven the market’s ability to recover. The market has recovered from failures from the Great Depression to Dark Thursday to the tech bubble burst in early 2000. If we learn anything, it is that the market recovers. Assuming your investment portfolio is relatively solid waiting to recover can be worth it in the end. The fact is a down market is prime opportunity to pick up new stocks at prematurely deflated rates, so don’t opt for an annuity cash out.
Know your personal taste for risk. In the downfall of a recession it may be an opportunity for some self reflection. You may want to ask yourself this question: When the market turned did you buy, or sell your stocks to lock the loss? Reviewing past behavior is a much better indicator of future behavior than any advice you think you may benefit from. Take a look at where the recent markets has left you, do you need to be more aggressive to meet your goals or are you simply accepting a less luxurious retirement?
Diversify to survive. While the markets seemed to head in one direction not all moves went in with the same vigor. So while it is not smart to leave diversification as a replacement for solid investment attention, it can stave off large losses. So just because the markets have turned it doesn’t mean the old ways have left the building. Keep in mind there are more options than just stock investing – another way to hedge risk is to buy structured settlements online.