girlnextdoor

financial discussions with the girl next door

How To Invest In A Bad Economy December 2, 2008

Filed under: Uncategorized — girlnextdoorfinance @ 11:53 pm

Last week, USA Today posted an article about how you should invest in a bad economy. JD Roth at Get Rich Slowly mentioned the article, but I think he left out a key part.

The article suggests tips for various age groups of investors. One piece of the advice for people in their 20s, which JD didn’t mention at all, was this:

“But ignore the advice that you should make your riskiest investments when you’re young. You have lots of time — which means you can invest in a conservative stock fund, accept a lower return, and still reach your goals without worrying about catastrophic losses. “There’s no need to be in tech stocks or emerging markets,” Garrett says. “You can find great opportunities in stodgy old-fashioned blue-chip stocks.””

I think this is something that we almost overlook as young people. I have a good chunk of my money invested in emerging markets, and I have a pretty high tolerance for risk. My investments are worth quite a bit less than they were 6 months ago, which is even more significant given that there wasn’t a whole lot there to begin with. I’m not worried about it, since, as the article says, I have many years until I can touch my retirement funds anyway. Maybe I’m being a little too aggressive with my investments, especially since I do have a lot of time for a more conservative invest to grow. But aren’t a lot of companies that would generally be though of as “conservative investments” currently having problems? The automobile companies and lending institutions have gone under, and there is speculation that oil companies will never again see the profits they had in the past few years. I heard a few days ago that Wal-Mart is the only corporation that didn’t post losses in the past few months. I definitely believe that everything is cyclical – companies will have good years and bad years. But requiring a government bail-out is a little more than “having a bad year.” How do you decide where to invest when even the “safe” places to invest are going under?

What do you think? Are conservative investments are the way to go, or do you worry that inflation may out-pace conservative investments over the next 30+ years? Are emerging markets too risky? Is there something in between that you like, or do you mainly try to balance these two? Where do you invest?

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