Ride the economic cycle

There are so many debates these days on whether we are in a recession or if and when there will be a recession. Many desperately want the crystal ball or time machine to have a peek into the future because they want to base their investment decisions on this. I guessed some have to because of their jobs.

Is it almost impossible? Janet Yellen and Jerome Powell didn’t see inflation would be so bad. She is one smart lady with proven track record of flying color as the former Fed Chair.  Many was saying that the Fed was behind the curve in the past two years. It is just so easy to blame the person who drives the car. They try hard to get inflation up, but they can’t in the past 15 years. They care a lot about the working class’s hardship. We are very fortunate to have people on top with compassion. For those who said the Fed was wrong, they are right this time about inflation. Can they be right next time and every time consistently?

Therefore, I respect Warren Buffett’s intellectual integrity. He is so down-to-earth and honest. He would tell you straight that he missed the last pandemic recession. He can’t tell when recession will happen. He doesn’t base his investment decisions on that.

What about we mere mortals? Only act after the economic cycle has undoubtedly started and the market has showed solid signs without any more debates.  Since recession is still debatable, it might not be a good idea to second guess it and base your investment decisions on that. You would have an investment plan or portfolio mix based on your investment horizon and risk tolerance. Stick to it. If you have a few securities in your mix and you got extra money to invest regularly, you don’t have to buy the same percentage mix every time. You can see which is lowest compared to its all-time high price, buy that one instead. If your portfolio is diversified, they should perform differently in different economic cycles. There should be something in relatively lower price you can buy in each cycle regularly.  

Some people quickly sell most of their investments when they hear recession is coming. Many could be caught in a bad timing. If the recession doesn’t happen or happen much later, they might be sitting on cash for a long time because the price could be too high and they agonize to buy them at a higher price. Hope this doesn’t happen to you.

Published by Worthfy

Financial literacy and counselling

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