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Frequently Asked Questions About Investing During A Recession

By Erik Folgate

Here are some questions that I frequently get emails about and questions I hear from friends and family.

Should I cash out my 401(k)?

This depends on your age. If you are in your 20’s, 30’s, or 40’s, there’s no reason to jump ship on your 401(k) or IRA. You have plenty of time to recover from the losses. If you are in your 50’s or early 60’s, you may want to consider going to a very conservative position with your investments such as bond exchange traded funds or mutual funds.

Should I invest in gold right now?

Let’s be clear, gold has a bad long-term track record. However, it’s a good hedge against inflation, and it typically increases in value when the stock market performs poorly. Don’t trade in all of your stocks for gold coins, turning in about 10% of your stocks for gold wouldn’t be such a bad thing right now.

Should I re-allocate the investments in my retirement account?

Again, if you’re in your 20’s or 30’s, keep a growth stock allocation strategy with a little bit of bonds and dividend appreciation type funds. If you’re older, it’s a good idea to re-evaluate how risky your investments are right now. Start looking at a more balanced asset allocation that seeks boring, steady growth.

When will the economy and the stock market recover?

Obviously, no one knows this or they’d be on television making a lot of money telling you when it’s going to recover. As a citizen and someone who is investing in the United States economy, you need to ask yourself this one question: Do you believe in America? If you believe in America, then take this economic downturn as an opportunity to buy up a bunch of undervalued investments. If you believe this is the beginning of the end for the United States, then invest or don’t invest accordingly. Personally, I believe Americans are resilient. I don’t like some of the things President Obama is doing to revive the economy because it involves massive amounts of debt, and I hate debt. But, one single president cannot bring this country down. We recovered from the 1929 great depression where every other person was out of work and there were lines around the block to get food. I just checked my email on my iPhone and watched a recorded television show. I think we’re good. Don’t let the media freak you out. They are sensationalists. They only want to capture your attention.

Ask yourself that one question, and the rest of your investment questions will fall into place.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • http://www.investoralist.com Dana

    Good point on how many aspects of the recession is sensationalized. Even when unemployment jumps from 6 to 9%, we still have to remember that the majority of people are employed, and need to consume to live. Thus for those that believe in the recovery, this is not a bad time to start looking for opportunities.

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