PostHeaderIcon The Lessons of Recession

Investing in a volatile market environment is hard enough for investors. But facing a market downturn and an economy in recession can even increase the risks as well as add up greatly to the worries. But for every experience, especially during the bad times, there are always lessons to be learned.

And it is only after an investor goes through such market downturns and make it out until the economy recovers that these lessons that can effectively be employed for better investing decisions in the future. Here are some of those common lessons.

Diversify Your Portfolio

Many investors have suffered greatly and lost considerably by investing only in one type of investment. And just when the market goes down, so will the investment suffer considerably. Investors must keep it in mind that a diversified portfolio can somehow lessen the losses in a market downturn and may me more able to recover quickly just as the economy recovers.

Expect The Unexpected

Investors should learn to always expect the unexpected especially on their investments. Even in stocks, there is no such thing as a sure thing. What you might think as a strong stock position may well tank out at any time, especially in a market downturn. There is always an air of unpredictability in any market and even the best analysts and advisers cannot predict it most of the time.

Keep Liquidity In Mind

It may be good to put your money fully invested. But you must also think about liquidity matters just as well. Having all your capital locked on certain investments can be seen as a disadvantage in that you may not have access to ready cash when needed. This can mean that you may also miss out on many wonderful opportunities that might require accessible cash.

It pays to also have cash accounts set aside as part of your investment. Putting up cash on a Certificate of Deposit or even a money market account allows you to have money invested on a readily liquid investment.

Be Patient

You just experienced a market downturn and seeing your investments dwindling in value from day to day. What would you do? The last thing that you should do is to unload all your investments with hopes of avoiding further losses. Keep in mind that markets don’t usually don’t stay at the same spot.

Although it may take time for the market to bounce back, recovering your losses can mean staying put on some of your stronger investments. All it takes is patience.


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