The Best Investment Strategy During a Recession
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If you’re like me, you’re feeling the pinch. The price of gas doubled in four years. Food prices also gone up, and particularly if you’re trying to be healthy by including some organic food into your diet, you’re paying about 50%-75% more. For many of us, our incomes unfortunately have not kept up with the rising prices.
For tough times like these, it’s important to remember the fundamentals of investing so that we can maintain our wealth through the uncertainties. Invest in your time and invest in your health, because they will always be valuable.
Hold Your Value Stocks
Time is Like Currency: As every day passes, you can choose to spend it foolishly or to invest it wisely. Time, just like money, has no value in and of itself though. It only has value when it’s converted into something. Money can be converted into real estate or stocks. Likewise, time can be converted into developing a relationship, such as with your family and friends.
The value of assets can rise and fall based on the whim of the market. However, the value of an afternoon spent with a dear friend, an hour spent for family dinner, or even five minutes to remind your sweetheart how much you love that person will always be valuable, and those memories will be even more valuable as time goes by. If those moments were ever taken away, how much money can be spent to get them back?
Good Health is Good Wealth: Economic difficulties can cause stress, which can eventually lead to hypertension, anxiety, and insomnia, and the physical imbalance can further spiral the mental and spiritual imbalance. America has spent over $2.3 trillion on health care, making it one of the biggest industries that exist. That $2.3 trillion does not come with a money-back guarantee either. Remember, money problems can be immediately fixed when you get more money, but health problems (physical, mental, spiritual) are not fixed as easily.
You can sacrifice your money to get more healthy, but never sacrifice your health to get more money.
Sell Your Lagging Stocks
OK, there has to be cutbacks somewhere during tough economic times. Should you cut back on your travel? On how much shopping you do? Or perhaps on how frequently you dine out? The first place you should start is not external, but internal. Cut back mentally with your general lifestyle expectations, and the specific things you should cut back on will be more evident.
A little while ago I spent a summer in Southern California and hung out at Manhattan Beach, which is one of the most beautiful (and expensive) beaches around. One day I overheard a man tell his wife about a friend who had a salary cut, and it turned out he was only making $300K a year. The wife exclaimed, “Only $300,000 a year? How will he survive?” The husband then explained how the man would need to adjust his spending habits in order to live within his means. I just shook my head because the median US income was almost $50K per year, and someone is struggling to survive with six times that amount.
Expectations with standards of living is relative. If you have kept your investments in your value stocks (quality time, personal health), then everything else is essentially expendable.
Ride Out the Storm
Sound investment is to have a strategy for the long haul. Have a clear vision of your long-term goals with your time (your family, your friends) and with your health (physical, mental, spiritual). Stick to the plan and don’t deviate, irregardless of the economic climate.
Follow this strategy and you will be wealthy. Guaranteed.
“Invest in your time and invest in your health, because they will always be valuable.”
I love how you underscore the importance of time devoid of money. Time in itself is the very fabric of life. And time should be spent in a meaningful and joyous fashion. That is true riches.
Nice post!
Bamboo Forest’s last blog post: Realizing You’re a Magician Can Create Magic in Your Life
Hi Bamboo - agreed, money has arbitrary value, but time itself will always be valuable. Money has a way of making us forgetting the truly valuable things. Thanks for the feedback!
You know Al, yesterday I saw a drawing of a circle that said “must-have”, surrounded by a bigger circle that said “want”, surrounded by an even bigger circle that said “would be nice to have”. I think that as long as you have the things in the “must-have” circle (health, food and other basic needs, having time to spend with family and friends), everything is fine. The things in the other circles are things to aim for but are not necessary in order to be happy. I guess during economic hard times we just have to remind ourselves to be happy in our “must-have” circle.
And how does one survive with only $300,000.00 a year?
Marelisa’s last blog post: Six Steps to Creating the Life You Really Want
I am a buy-and-hold type of investor. I really learned to NOT pay attention to temporary (even if long) fluctuations. Having said that, it’s true that we shouldn’t hold on to losers in our portfolio, as long as they truly are losers and not just temporarily down.
Vered’s last blog post: I Need Your Support Today
“Only $300,000!” It’s true, eh? We tend to live up to, and more often than not, beyond our means regardless of what we make. And we can easily get caught up in work, a hobby, a project. I realized the Urbane Lion and I were getting into that mode with our blogging. I have suggested a daily Shut Down The Computer rule. We still need to take time for ourselves as individuals and as a couple.
Urban Panther’s last blog post: Does the Panther fit the bill?
OMG Al, I could write a book on this subject! I always had fairly simple tastes. I have been through some “chicken noodle soup” periods in my life. And, when I became a business owner and made very decent money, other than buy a boat and travel twice a year, my lifestyle didn’t change much. So, after having sold the business and spent two years without income just to work around the house, I accepted a government job that pays 6 digits less than what I was making as a business owner. Nevertheless, apart from the cutbacks in the travel and investing department, my lifestyle hasn’t changed one bit.
Great post ! Thanks!
Al -
Fantastic. Keep buying more shares of great corporations that have been around for more than 100 years. You can’t go wrong with it.
Shilpan
Shilpan | successsoul.com’s last blog post: 9 Simple Ways to De-stress Your Life that Actually Work
@ Mare - seems like a lot of people these days get the “want” and the “would be nice to have” circles confused with the “must have” circle. I guess that’s what economic cycles are for - a bit of a reality check (such as living on a measly $300K!).
@ Vered - agreed, sound investment strategy ignores fluctuations. It’s tough though to ignore a fluctuation where the Dow Jones dipped below its mark from 8 years ago. Take the cycle out long enough however, and history indeed shows you win eventually in the end.
@ Urban Panther - the Shut Down the Computer rule is a great one! It’s summer and there were times I let a nice day come and go because I spent too much time on the computer, so I know where you’re coming from.
@ Urbane Lion - that’s pretty awesome that your lifestyle did not change much before and after a 6-digit income. That is the epitome of one of my favorite phrases: “Don’t be too busy making a living that you forget to make a life.” Thanks for the feedback!
@ Shilpan - value investing. That is indeed the key. Say, there’s this great investor named Warren Buffett that you should know about
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Hi Al - These are brilliant tips. Time and health are so important. I used to think health didn’t matter, so long as I managed to stay alive - but now I realise it is the most important thing we have.
I feel sad for that guy who didn’t know how to adjust to earning $300,000 a year.
Cath Lawson’s last blog post: Self Confidence - Does Doing Beat Telling?
Hi Cath,
I sometimes have to remind myself that health is important. It’s so easy to take shortcuts with our eating habits and with our lifestyles, yet gradually our health gets neglected. It’s unfortunate because health is indeed the most important thing we have.
Hey, thanks for the investment advice! How timely! I should just sell off the laggards in my portfolio, instead of hanging on to them.
Thanks,
Evelyn
Evelyn Lim | Attraction Mind Map’s last blog post: Face Up To Your 6 Basic Fears
Hi Al,
I love how you emphasized the importance of our time. We only have 24 hours each day, and if we don’t spend them wisely, we can never get them back. Too often we waste time and later wonder “where the time went”.
I also agree health is very important. It’s when we’re sick or having surgery that we wish we had taken better care of ourselves.
Some things just shouldn’t be taken for granted.
Barbara Swafford’s last blog post: Interview With Lorelle VanFossen - Part 2 - Errors Bloggers Make
@ Evelyn: yeah, let the laggards go! And what I mean by laggards are the material things that we want, rather than need.
@ Barbara - sometimes I think we need to experience to a certain extent the loss of valuable time and health in order to truly appreciate how valuable they are. I think when growing up we have time and health in abundance, and sometimes it takes a drastic experience for us to realize that neither come in limitless supply. Thanks for the feedback!
One of our earlier presidents famously said, “Your leisure is your wealth.” I doubt we’ll ever hear that from the Oval Office again.
Chris | Martial Development’s last blog post: In Defense of the Dojo Kun
With the news that our jobless rate has hit its highest mark in years, I wouldn’t put it past the White House to try and spin it that way!
Really good article actually something we need given the current financial crisis that is going on. I really think it’s only going to get worst and not better for a while so we all need to be smart with the income that we invest and put aside especially for when tough times like these hit again.
I really like the advice about riding out the storm. I truly believe that it’s just a matter of time before things pick up again and by holding on to your current investments and riding it out you’ll only come out with more income later.
Nice post and good design on this blog!
Mike | Residual Income Online’s last blog post: Make Residual Income by Investing Some of What you Earn
Al, I got fully out of stocks in October after the first big drop. I’m glad I did, but you offer some good advice here as well.
By the way, how is your strategy holding up now that times are a bit worse?
Jason’s last blog post: Mac OS X Leopard: The Missing Manual
These are very sound tips. But do you believe that the stock market is a good indicator of economic recovery? I think Americans rely too much on a rising stock market as a sign of a good economy.
Wow. It sounds like most of your commenters didn’t even read your post, or they missed the point of it altogether! I especially loved your comment about investing your time into relationships. Your approach to this topic is not only refreshing, it shows a depth of thinking into the really valuable assets all of us possess but unfortunately take for granted. Thank you for sharing your profound gift of putting things into perspective. Hopefully your future readers will appreciate it as well.
“Invest in your time and invest in your health, because they will always be valuable.”
Truer words never spoken - and never more overlooked than in our culture. Thanks. Many investors overlook things that have value in their pursuit of things that have prices.
best,
Dave
These are very sound tips. But do you believe that the stock market is a good indicator of economic recovery? I think Americans rely too much on a rising stock market as a sign of a good economy
Admin THANX
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Very good points and I agree with you especially the health being your wealth as well as we sometimes forget that. What is the use of doing everything you can to work your body into the ground. Id rather be healthy than wealthy…almost lol
Riding the storm is only good though if you have the time. If you are a babyboomer like me I dont have much time to build up what I lost.
I really enjoyed your post. I have read over a few other posts you have up and I will say you have done a great job of blogging. I will be looking for new post daily…Keep up the good work! I hope you will also find my blog interesting.