January 7, 2016 at 12:31 pm #388pnguekamParticipant
“Recession!” It seems to be the single most popular word on the mind of Americans. News outlets love it. Retailers hate it. The general public — they fear it. And the rich? Well they manage it. And you can too if you know how. Here’s three tips that can help offset your recession fears, preserve your investments and in some cases actually make you some money!
1. Insure your stock.
Did you know you can insure your stock? Sadly most American’s do not know this very valuable piece of information. Of course you can’t just go out and buy stock insurance from Progressive or AllState, but it is not much more difficult than that.
Insurance for your stocks comes in the form of “stock options”. Until recently options (for short) were reserved for a special group of investors who had special connections. But in 1973 Chicago Board of Trade launched a new financial exchange they called Chicago Board Options Exchange. While the name itself may not mean a lot to you what it allows you to do could mean the difference in saving your retirement account, or watching it dwindle away to nothing.
At the core what options allow is for a trader to insure, or “hedge”, their position against catastrophic loss. Maybe you’ve heard of a hedge fund. These highly specialized funds specialize in trading these particular investment vehicles. But investment hedges are not reserved for only the sophisticated investor, everyday individual people like yourself can invest in them as well.
If you have some money in the stock market and would like to protect it call your broker and tell him you would like to talk about some “protective put options” to insure you against loss. If he says he doesn’t know what you’re talking about ask for a different broker. If they tell you “you don’t want to do that” — ask your broker how much money he made for you in the last three months. If they tell you “here’s how you do it” — now you can protect your portfolio against a major turn in the market
2. Rent your stock
Many Americans rent an extra house or two every year and benefit from the extra income. But did you know you can “rent” your stock as well? Just like you can use stock options to insure your portfolio, you can also use options to make money on a portfolio that is going nowhere.
After a major downward move in the stock market like we saw during 2008 an immediate rebound is not likely. More often what we see is a sideways market. Simply put the market goes “no where”. However, just because you are not losing money in the market it does not mean you are making money. One way you can make some money is by renting your stock out with call options.
What this type of option allows you to do is to create some income from your stock without selling the stock. A lot of investors like to use this strategy to offset losses and to dollar-cost-average down their position. If the market never recovers they are able to recoup their investments. Or better, when the market does recover, they are literally able to catapult their profits to new levels. This is a sure fire strategy to beat the great recession and protect your financial future.
January 22, 2017 at 4:25 pm #1036fox shawcrossParticipant
Nice points and following points below too will help in tackling rough patch / recession.
1. Avoid Investing Potentially in Volatile Sectors
2. Increase Your Cash Reserves:
Investing in cash doesn’t make much sense in terms of returns. But it may be a lifesaver during a recession or bad days.
3. Protect Yourself From Inflation:
4. Develop Passive Income Streams
5. Develop a Contingency Plan
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