How to Choose Safe Investments in a Struggling Economy

Choosing Safe Investments For Your Dollar

The economy is not doing well. Stocks and mutual funds lose part of their value each day. You need to know what to do with the money you already have invested and how to safeguard new investments. This article will give you tips for finding safe investments for your money during a financial crisis.

Instructions

1. Invest in deposit accounts that are insured by the FDIC. Examples of this type of account include money market accounts (not money market funds), savings accounts, checking accounts and certificates of deposit. You make a smaller return in the long run, but the value of your deposit is protected from loss. Adhere to the maximum $250,000 invested at one institution to receive this insurance on your accounts. This is your safest option for investing money.

2. Rebalance your investments. Take this opportunity to look at the overall mix of your accounts. Consider moving some stock funds to bond funds or bull market funds to some bear market funds. If all of your money is invested in domestic large cap growth funds, diversify into other parts of the market, such as international funds or small cap funds. Diversifying your portfolio will expose you to less risk, making your overall investments safer.

3. Consider your need for liquidity, or fast cash. If you don't need the money in your mutual funds for the next ten or more years, it may be O.K. to invest in a stock fund or real estate mutual fund. Based on the past history of financial markets, the stock market always exceeds its previous higher levels over time. If you may need the money next year to pay for your child's college tuition, a stock fund is not a safe option. Choose a certificate of deposit or money market account for added safety.

4. Invest your money in the startup of a small business offering services and goods that people need when the economy is bad. There is more of a need for counseling, financial planning advice and staple items such as bread, milk and water.

5. Invest in stocks that have global demand. Avoid stocks that have only a local interest. Stocks with global demand include gold and oil stocks.

6. Invest in stocks of staple items that retain their value in rough economic times.

7. Invest money in foreign markets that are not affected by this country's struggling economy. Just make sure that country's economy is strong first.

Tips & Warnings

• If one country's economy suffers and the rest of the world depends on its goods and services, it can cause other economies to have problems as well. Realize that this effect is possible before investing in foreign financial markets.

• Avoid selling all of your stocks and mutual funds. You won't have a chance to recoup the losses you've suffered if you're out of the market when it bounces back.

Resources

• FDIC Website About Insurance on Deposits