Jaime Catmull, Contributor
Jan. 16, 2023
When it comes to making an investment strategy, the first question you must ask yourself is: What do you want to accomplish through your investing? The simplest answer is, undoubtedly, ‘make money,’ but your why will drive your specific investing strategies.
Do you want a comfortable retirement ? Are you looking for enough money to buy a new home or car? Do you aspire to make a regular income, so you can quit your current job? Perhaps you want to make money quickly or over a span of decades.
Once you’re aware of your own needs, you can better determine the best approach to your investing for the coming year. Here are a few other important tidbits you’ll need to know when planning your strategy.
Diversify, Diversify, Diversify
The first and most important rule to follow when investing is to diversify. The now clichéd adage, ‘don’t put all your eggs in one basket,’ still remains accurate.
The market can be incredibly volatile, and even if you plan on putting your money in relatively recession-proof stocks, no one has a crystal ball to predict the future. A stock that you may believe has nowhere to go but up could crash for reasons no one could possibly foresee.
Todd Walsh, CEO of Alpha Cubed investments, says, “We want a good strong core of dividends in the portfolio to do the heavy lifting as we continue to navigate the economic headwinds we are facing.”
In other words, if you want your investments to provide more money than you put in, create a solid base of reliable, diversified stocks, and then experiment with some riskier options. As you diversify your investments , try not to make your investment decisions based on your emotions about the current market conditions. Look at all your options before jumping in — or out.
Understand Reliable Stocks
By understanding that reliability doesn’t mean perfection, you won’t have unrealistic expectations for every stock you purchase. Whether we face a recession in 2023 or not, there are industries that will provide reasonable growth.
Some believe that we’re now experiencing a sawtooth market. A sawtooth market is characterized by stocks that rise and fall quickly due to instability, creating the titular sawtooth pattern. That instability is a nightmare for new investors, and it is why the following industries are good places to put your money. They fight the sawtooth and tend toward stability.
There are several basic necessities that people must use, even in poor economic conditions. These include electricity, waste management, water, gas, and other basic utilities, and they’re a popular, reliable stock option.
Whether the market is up or down, shoppers consistently flock to lower-priced big-box retailers such as Costco, Big Lots, Walmart, and other such stores that cater to the budget-conscious.
Health and Medical
Investing in the health and medical industry generally proves to be a consistent win for investors. Pharmacies and pharmaceutical companies, like Walgreens or Johnson & Johnson, are typically a safer bet. Health insurance companies are also often included in this category.
Most people would rather fix what they own than purchase new items, especially during hard economic times. Investing in phone, auto, or HVAC repair services, among other similar businesses, should yield steady earnings.
Despite the state of the economy, many companies will still use accounting firms to handle their payroll , and the average person will most often turn to professionals to try to save money on their taxes.
Consider Trusting Professionals vs. Investing Yourself
While there are plenty of apps designed to help budding investors, relying on professionals to guide your investments may be a wise move. During times of economic uncertainty, it’s wise for investors to shift from a primarily defensive posture and begin looking for some relative performance from the growth sector.
Knowing how to go on the offensive and look for stocks that may offer incredible growth potential takes experience, so seek wise advice from financial advisors. It’s hard for a beginner to understand, which is why it’s important to lean on advisers you can trust. Getting high yields means knowing precisely when to buy and sell, not just what to buy and sell. The industries mentioned earlier will provide safer, more consistent earnings, but those who want to get massive dividends in short amounts of time need to put their money in strategic places.
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