Investing is a great way of allowing your money to work for you – and depending on where you choose to invest, you can make a return on your savings in the short, or long term. All investments come with some level of risk, which is why it is essential to use an investment research platform to allow you to make sensible decisions and answer any questions you may have. Investing when the economy is unstable may seem risky, but there are ways that you can navigate it to your advantage. Read on to find out more.
Inflation and slow growth
During an economic downturn or recession, you will find that inflation takes hold which leads to slow growth in the economy. The economy will slow when consumer demand plummets, and there is a prolonged period of low activity within the economy itself. This tends to be because of inflation, as prices rise and people can’t afford to pay for things they once could, and more of us decide to save our money in case inflation continues to increase. This leads to the economy stalling and growing slowly. Many countries around the world are suffering from this issue currently due to various factors including recovery from the pandemic.
Investing in an economic downturn
Investing is becoming more accessible for all of us, so it’s no surprise that more people are taking the chance to grow their hard-earned cash and hope to make a return. If you’re new to investing, you may not know how to handle the current, unstable economy, but don’t worry – there are ways that you can get your cash into a better position to deal with the ups and downs that the market can bring. Read on as we take a look at some of the ways in which you could invest your money safely, and sensibly, so you can carry on investing during this uncertain time.
Index funds
These funds are less risky than investing in individual stocks. They allow you to invest in a range of different funds, which means you will be less likely to suffer a huge loss. Spreading your money out into an index fund means that you will be able to manage the peaks and troughs that happen throughout the market when the economy is failing. With the current economy becoming unstable, it is harder to determine what will happen with one stock, so choosing an index fund means you spread the risk over a few. In the past, index funds have recovered more quickly after a dip in the market – and although you’re less likely to make large returns, you can mitigate your level of risk.
Non-cyclical stocks
These are some of the best when it comes to riding out the peaks and troughs of an unstable economic market. Also known as defensive stocks, these investments can help you to protect your portfolio from losses, and may allow you to grow your savings, even during difficult economic times. These stocks refer to companies that are staples, and will survive during difficult economic times, like supermarkets, health stores and other consumer products – this is because no matter how the economy is looking, even if people are saving their cash due to inflation, food and health/personal care products are non-negotiable. Investing in these types of stocks means you can protect yourself from loss.
Build savings
Why not use the current economic situation to give your emergency savings pot a boost? Of course, you can do this by investing in funds that you think will bring a return rather than a loss but adding them into a savings account could be helpful too. During a time of economic uncertainty, having as much money to fall back on as possible is advantageous, so you can use it if you find that you’re struggling. If you are worried about losing money that you have invested, see how much you can afford to save to give you extra peace of mind if the worst was to happen.
Don’t panic
If you are worried about your investments in the current economy, one of the best things you can do is stay calm. Try not to panic as this could cause more harm than good. With a recession, no one knows when it is going to happen, or how long it will last, so the best thing to do is to ride out the storm and focus on your long-term goals, rather than what is imminent. Often, the market will recover and so will your investments, you just need to give it time.