What You Should Be Doing During the Market Crash.
Bear markets are only opportunities.
Good morning investors,
The S & P 500 is down around -20% as I am writing this article. Other indexes like the Q’s and the Dow Jones Industrial are also not looking so hot as well.
Many investors are getting cold feet considering the impending recession and the largest single rate hike since 1994 at the last FOMC meeting.
The federal reserve has recently pivoted from its slightly less aggressive approach to fighting inflation. The latest CPI (consumer price index) may read at 8.6%, which is a 40-year high and also 0.1% higher than the reading in March., which was supposedly thought to be the peak.
But times like these are only opportunities to buy your favorite companies at a discount. At least, that’s what most long-term investors know.
What Should you be Doing?
Well, I hate to break it to you, but there is no correct answer. This question will be answered differently by everyone.
The key to surviving a market crash is to invest in “strong” stocks. Stocks that are more or less recession-proof. Of course, this is my personal opinion, but given the economic climate, we are in. So I wouldn’t necessarily be too eager to throw my money into a small-cap growth stock.
Yes, investing in a company like Proctor and Gamble is not as flashy as a company like Rivian. However, two years ago, we were in a market where you could have blindly thrown a dart at a wall of stocks and made money.
If you are new to the investing world, new as of two years ago, you shouldn’t expect those kinds of returns in the future. With the stimulus the economy got from the pandemic, 40% of the money supply was printed into existence.
That means an abundance of new money was invested into the market at a rate never seen before. With the now Hawkish Federal Reserve (hawkish means not accommodative ), only profitable and necessary companies will strive during a rising interest rate environment. Obviously, there are going to be other companies that do incredibly well during this type of environment, but that’s for another article.
With the worst of both worlds: high inflation and rising interest rate, I would personally seek to preserve capital. Many people thought Warren Buffet was out of touch, but his fund Berkshire Hathaway performed better than most of the major indexes. That is because he invests in solid companies that are money-printing machines.
His top holdings include Apple Inc, Bank of America Corp, American Express, Chevron, and The Coca-cola Company. Every single one of these companies has substantial cash-flowing balance sheets, and their products are necessary to society.
That’s it; that’s his secret to investing (for the most part). Especially in times like these taking a thing or two from warren buffet isn’t the worst idea.
I hope you were able to take something valuable away from this article. If you enjoyed it, please consider sharing it with a friend.
As always, have a great day, and remember to live in the moment.
