How to invest in an economy like this
I’ve been doing this for ten years. As a third-generation advisor, I also grew up listening to economic reports on the way to go skiing with my dad or driving to Crookston, ND, for Peewee hockey games.
I remember the exact spot at 19 when my dad explained why inflation is better than deflation.
Growing up in the business has been a massive part of my story.
I’ve been around the block, and I can confidently tell you that this economy and its current state are challenging to invest in.
If you look at the data and listen to Chair Powell, the Federal Reserve’s equivalent to a CEO, you’ll end up sitting back in your chair and scratching your head.
So what to do?
After all, the combined assets from readers reading Weekend Reads are well into the 100s of millions. Three things:
- Don’t make a rapid change to your strategy – your strategy has most likely worked up until this point, and rarely does making a fast change result in great results.
- But do change your tactics – own a real estate portfolio? Keep buying, but buy differently. Own stocks, and check your exposure to tech. Have cash? Bring it to your brokerage account and purchase high-yield money market funds. Own a business? Work on profitability; it’ll raise your valuation.
- Stay Diversified – this is key. Everyone knows you can make much money when the economy slows down. But when it comes time to protect your asset base, don’t be a hero and try to hit a home run. Stay diversified, keep your cash flow high (if possible), and cut costs where you can.
Here’s another freebie – read a lot.
While not particularly great times, these are interesting times. The tech trade is looking stretched; there is a major war in Europe, interest rates are at decades highs, the economy is adding jobs, etc.
Though times are challenging, it’s during these times that you learn about yourself, your balance sheet, and what you did wrong over the past cycle.
Stay nimble.
