MPower: How To Invest In The Wake Of FOMC
September 20, 2022
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What will the Fed do next? Raise rates a full point? Three quarters of a point?
The financial market seems like it hinges on the Fed’s next move. A full percentage point would almost assuredly send the market into a decline even deeper than the one we’ve experienced over the past few weeks.
Each CPI report seems to be more troublesome than the last.
The fact is, inflation has not gone down in any significant way, even as the Fed takes increasingly aggressive action. However, since inflation is proving to be stickier than previously anticipated, one full-point hike may just be the beginning.
This may mean the “pain” affecting Americans is about to increase. (As Fed Chair Jerome Powell has warned in his recent press conferences.)
And while no one can predict the future, we can all plan for it.
Whether we get a full-point increase or something smaller, many people look at the current economic landscape and cringe at the idea of investing.
But now could very well be the beginning of a large opportunity. As many successful investors will tell you, some of the best times to get ahead are right after a crash.
The best time to start buying is often when the public is doing the most selling. Sooner or later, those sellers will get exhausted, and the market picks up again. While the arch of the stock market is long and full of ups and downs, it still bends toward positive.
The best thing you can do as an investor is become comfortable with the idea of getting rich slowly. Using downtrends in the market to add to your best portfolio positions and lowering your cost basis… this is how you make the most of these fearful times. These are the times to be greedy.
One important caveat: Now is not the time to burn money on risky investments or unproven companies (that could potentially go under in a hard economic environment). In fact, you want to look for the exact opposite — stocks or ETFs with strong track records in industries that are immovable.
This may not sound like the sexiest way to invest, but it has worked time and time again.
Times of economic turmoil are perfect for finding great stocks at huge discounts that don’t truly reflect the company’s worth. As Jeff Bezos once said, “The stock price does not always reflect the company.”
In other words, while the price of the company may fluctuate, owning the stock is still a good idea long term. For investors of Amazon (AMZN) — a stock whose price sees many short-term rises and dips — that long-term horizon has worked out well.
Using the down market to buy a stock like AMZN — a name with staying power — on sale is a great strategy. As stocks draw down and the outlook looks increasingly grim, we can look to scale into positions, buying bits and pieces as prices fall. That way, we don’t have to guess when the bottom is in; we just continue to add pieces regardless of what the stock is doing.
Once the economic climate improves and another inevitable bull market again takes shape, you’ll be ready and waiting to elevate your financial future.
If the future is anything like the past, you’ll look back and thank yourself.
Today’s feature: Blue Chip Stocks – Amazon
