To The Moon

The leading US exhanges have already fell into bear market territory the past week. Seeing their portfolio consistently in the red, investors might we concerned - what next? In this post I will lay out some advice which uncertain investors can follow.

1. Reassess Your Portfolio

First, you should closely reassess your holdings. Identify stocks that will potentially be poor performers in a recession/inflationary market. Then, decide whether you are willing to take any gains/cut losses if the business fundamentals will deteriorate in a recession. However, for companies that you remain confident on their long term prospects,do not sell them! Rather make use of a downturnto lower your average cost. 

2. Shore Up Cash

Be it from liquidating a portion of your current holdings, or increasing the proportion of your salaryset aside for investing, I believe it is now a good time to shore up cash, aka reserve ammunition. Ideally, setting aside a cash pile should have started way before signs of a recession have appeared, but it is not too late to start now! Personally, I am aiming to set a 20-30% cash pile as I start to load up on bargains

3. Have A Shortlist Ready

Next, it is time to deep dive, research and identify strong companies that you would wish to own for the long term! Keep a shortlist with their target prices, so you will be ready to pounce when their valuations fall to a "buy" range. Having a list also helps as in an event where a majority of your shortlisted stocks dip below the buy price, you willnot be in a panic on which to purchase as you will be able to pick those with the best upside potential.

4. Hedge Against A Recession

This might not be a comfortable move for conservative investors. But more daring investors might wish to hedge their portfolio in case of a recession. I recommend a simple hedging mechanism (no options/futures as i reckon many investors will not wish to overcomplicate their portfolio). What you can do now is to simply purchase companiesthat do well in a recession e.g. supermarkets, budget retailers etc... Additionally, you can purchase an inverse ETF like $Tuttle Capital Short Innovation ETF(SARK)$which will gain as the market falls.

5. Stay Calm

Finally, stay calm. Recessions are inevitible in theeconomic cycle. However, most investors make their largest earnings from staying calm, invested and opportunistic in a recession. 

Therefore you too should not worry. Relook at your investing philosophy and your reasons for investing. Follow the steps above and wait for the opportunity to arrive. Finally, remember to only invest money you can afford to lose/ not need in the next 5-10 years as the largest gains are long term gains through compounding.