Don’t! Get into cash instead. Many, including the likes of hedge fund manager Ray Dalio, are forecasting a market crash, possibly alongside a global recession, in the second half of 2019 / 2020.
For this to be an effective investment strategy, when this crash happens, you’ll need to be ballsy and buy at a time when the rest of the market is fearful and selling.
Right now, the greatest investor on earth, Warren Buffet, is sitting on more cash than ever before. This is a clear indicator that Buffet believes a dip is imminent. He has famously been quoted for saying “when markets crash, it rains, it rains gold! And when it rains gold you want to be out there with a bathtub, not a thimble”.
I think what will be difficult will be to know at what point we have reached rock bottom. Ray Dalio predicts a recession that may last quite some time since interest rates can’t go any lower, and quantitive easing can only go so far.
That being said, when the stock markets do go on sale, you should consider buying a mixture of:
- stocks (individual companies) that you understand, believe will grow, and be around for decades to come
- passive, low-cost tracker funds (rather than an actively managed fund where fees are high due to having to pay the fund manager)
My 2019 thus far…
I plan to sell all my holdings by March / April but I wanted to share an example of how investing in a company you understand (at least from a business model and brand standpoint) can pay off.
Off the back of a tip shared on the Financial Times’ Stocks to Watch page, I bought £1,000 worth of ASOS shares on 4th January. As the high street dwindles, the online fashion market continues to grow. In this space, ASOS is a leader with a strong brand and clear understanding of their audience. Offering cheap, next-day delivery, they’ve also nailed the fulfillment side of the business, which is so critical for e-commerce businesses. In March 2018, the ASOS share price was £70 / share. So when I bought at £25 / share, I knew there was huge potential for this stock to bounce back. Since then, this investment has already risen by 28%, to £1,281.
A tracker fund I really like is the Legal & General Global Technology Index – I also bought £1,000 worth of this in January, and will be buying a lot more when the market dips. As the name suggests, it’s simply an index of the world’s biggest technology companies. The world’s adoption and reliance on technology is a clear trend that is only growing year on year so this one is just a no-brainer from my standpoint.
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