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Investing During Tough Economic Times

Over time every economy either thrives or declines and then, in most cases, makes its way back up again in a cyclical manner. When an economy is challenged, you have to take a very close look at your finances. You ultimately need to review, regroup and perhaps recoup depending on your circumstances.

Taking steps to manage your spending can help you position yourself to survive a financial setback such as getting laid off from your job. In difficult economic times, often simple things can make large improvements to your personal financial situation. The first is actually identifying the signs of a slowing economy and taking action.

The signs of a slowing economy are everywhere, based on pronouncements from politicians and economists alike, and the gradual weakening of the TT dollar. The stock market is also a leading economic indicator. If you’re a keen investor, a continuous decline in the stocks traded on the market may help predict hard times, but it could also be the first indicator that the economy is turning around. As such, now is the time to start getting prepared, if you haven’t done so already.

If you haven’t thought about investing as yet, you could start by investing in credit union accounts, or a low-cost money market fund, but be sure to consult a registered financial adviser before you make any investment decisions.

According to the investment experts, now may be a great time to invest in stocks, not sell them, as you keep your eye on the recovery of the economy. Presuming you have diversified portfolios, which would be wise for any investor, you would see that they were designed for times like these. Portions of the portfolio that are expected to outperform during a slowing economy will presumably do so, and when the downturn has run its course, the parts of the portfolio that traditionally outperform in a recovery, are already in place and ready to rise to the occasion.

Now is also a good time to re-evaluate the amount of risk you are comfortable with in your portfolio and adjust it accordingly. Investors should find the level of risk in their portfolio where they are comfortable with whether it is an up market or a down market.

An investor should not be too quick to buy or sell their stocks. When a wise investor looks at the downside risk of firms and projects over a three- to five-year investment horizon, versus a trader’s point of view, the investor can identify firms with value.

Here is a checklist you can refer to when evaluating firms and considering their viability over the next three to five years:

  • Does the company have a strong management team?
  • Does the company have both strong financials and access to capital?
  • Is the company expected to continue to lead in its field?

This evaluation should obviously be done with your investment adviser and you should also conduct your own research when making investment decisions. The Trinidad and Tobago Securities and Exchange Commission (TTSEC) is a valuable resource to which you should also refer, to find out whether your investment security and broker- dealer are registered.

The Trinidad and Tobago Securities and Exchange Commission is not an investment adviser nor is it a brokerage house. This article is intended solely to provide you with the information you need to help you make sound investment decisions and to ensure that you are familiar with and understand your rights and responsibilities as a consumer of financial services. To lodge a complaint, ensure that you complete the prescribed complaint form located on the TTSEC website www.ttsec.org.tt.

 Before investing, educate and empower yourself!

To learn more, visit investucatett.com, follow us on Facebook or call 624-2991. If you have any questions or comments feel free to email us at ccei@ttsec.org.tt.