The Rats of Wall Street

Investing in an economic recession: The worst thing you can do in a recession? No, it’s not doing nothing. It’s selling at the wrong time. Still, when a vessel is sinking, even the rats know it’s time to jump ship, right?

Example #1:

Selling your stocks at a low point and then buying them (or others) back when the market rebounds and goes higher is a surefire way to lose money. You need to be convinced that the market can drop much further.

But… though the market may not drop much further, it’s certainly capable of doing so. I think the entire year is going to stink. So JUMP. Reducing your holdings by half would be a good idea.

Example #2:

The stock market goes up in the long term. If you just stick to your guns, eventually you’re going to make an average of about 8 percent a year.

But… if you’re 10 years or less away from retiring and cashing in your savings, you shouldn’t stick with a market this volatile. So JUMP. The market has been known to take a lot longer than 10 years to get going again. For example, it stayed flat from 1965 to 1982 – a period of 17 years.

Example #3:

Where are other options for investing in an economic recession? Government bonds? Their returns barely beat the rate of inflation, and some would say they lose money because the official rate of inflation is undercounted. I happen to agree.

But… cash is not trash. So JUMP. Double the money you put in your savings account. Take out short-term CDs. You won’t get rich by doing this, but you won’t lose the money you worked so hard to earn either. Gold and silver are no longer cheap, but they have room to move higher. Every investor should have at least 5 percent of their savings in precious metals.

The JUMPS carry the day. Pare your stock investments by half, and load up on gold or short-term CDs.

[Ed. Note: ETR’s Investment Director, Andrew Gordon, is the editor of INCOME, a monthly financial advisory service that uncovers income-generating stocks that promise safety (first and foremost), along with much-higher-than-average profit potential.]