During a phase of economic uncertainty, knowing where to put your money can be both challenging and stressful. The two words we are hearing plenty of nowadays would have to be “stocks” and “bonds”. Are you aware of what they are, and their respective plus and minus points?
Knowing is half the battle won – here’s a quick introduction:
Stock prices often fall months before a recession kicks in, which also means that they often bounce back up before the recession tides over. That is why it is crucial to recognise the signs of a recession and its phases of recovery, as well as understand how different assets perform during those periods:
Stocks:
To make the most of lower prices, you will likely need to buy in before the recession starts or during its early phase. Also, stocks that pay cash dividends can provide income, which can help offset any potential portfolio losses.
Bonds:
Prices for bonds tend to rise during a recession. The Fed stimulates the economy by lowering interest rates and purchasing Treasury bonds.
Most importantly, it is important to not lose sight of your long-term investing strategy, and keep to a well-diversified portfolio that has a mix of different assets with varying levels of volatility. To find out how you can achieve this balance, I will be happy to share more through a personalised discussion.
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