What investment strategy is the best in this stock market now? It’s never too cautious to prepare for the unexpected and sudden market corrections especially for the ones that are more than just corrections. Bearish periods are notorious for upending traditional investment strategies. After all, markets don’t keep going up.
I don’t mean to sell your stocks now. I don’t think the markets are showing any sign of weakening. Just to think about your options and have them ready when you need them.
Instead, we need to adopt a bearish investment strategy to be successful in this stock market. To be prepared for a big drop, following a sharp drop that falls below the buy on dips level, a typical reaction is to reduce portfolio risk by investing in alternative strategies, funds and problems. This year, it’s going to be tricky. The FED is preparing on raising the interest rates a few more times. When interest rates go up, the bond prices go down. Should the stock market turn south, bonds may not be the first choice safe haven.
Cash is king. It’s never wrong to stay on the sidelines when markets are correcting. Interest rates are expected to go up; however, the meager CD rates banks are offering are not going to make you rich. On the contrary, it’s smart to hold onto a 1 1/2 % gain on the interest rather than to stay in the market and lose 25%.
Both real estate funds and real estate investment trusts (REITs) are options to consider. They are used when diversifying a long-term investment portfolio. A real estate fund is one that mainly focuses on investing in public real estate companies’ securities. They are typically invested in commercial, corporate properties, and in land or apartments complexes. A REIT is a corporation or trust that owns or finances income-producing real estate.
We may not expect real estate to enjoy a market boom like we saw between 2003 and 2006, but the real estate markets are not cooling down for sure. Prices are holding steady and inching up reasonably.
Waiting for more information or for the dust to settle are common traps for being caught in the downdraft, after that, missing out on low priced opportunities. Therefore, that cash is crucial because the top route to investment success is to buy low. Without cash, investors fully invested in stocks face somewhat limited options when markets turn south. Remember, being able to properly diversify among the strategies is crucial to protecting your portfolio.