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Jonathan Clements’ Recession Advice: Cash is King
By JLP | September 26, 2007
Today’s Getting Going column (free) by Jonathan Clements is pretty interesting. He talks about the fact that current signs point to a recession or slowdown of some sort and that one of the ways to weather the storm is to have cash on hand for two reasons:
1. In case you get laid off
2. In order to take advantage of falling asset prices (in other words to be able to buy low)
Here’s his advice for those who are worried about a recession:
- Keep fuding your 401(k) plan to get the full employer match. – I say keep funding it even if you don’t get an employer match or at least utilize an IRA.
- Stockpile cash in a money market fund. – Or an online bank savings account.
- Set up a home-equity line of credit. – Excellent idea as long as you qualify and then don’t spend the money unless you really need it.
- Pay off credit card balances. – ALWAYS a good idea
Pretty good advice.
Topics: Getting Going, Jonathan Clements | 3 Comments »
September 27th, 2007 at 8:59 am
I think it is important for folks not to sell assets or positions in their portfolio and move to cash in anticipation of a recession. You need to build an all weather portfolio. No one can predict what will happen in the future. If you move to cash, and we don’t enter a recession, you will hinder your portfolio returns. I tend to agree that recession is on the horizon, but changing your portfolio based on a chance is gambling, not investing.
I certainly agree with Clements’ ideas, but I fear folks will read his article and assume they need to sell their equity positions. Actions like this are the reason most folks fail to match their benchmark.
November 27th, 2007 at 6:09 am
We are fearless about holding assets already in the market, but where should one put new retirement account deposits in light of the continuing recession talk.
We are self employed, plan to retire in 10 years, and expect to deposit about $25,000 to a SEP-IRA for 2007. We came late to significant retirement saving and a misstep would have a bit impact at the stage. Do we:
1) continue with usual deposits to a balanced portfolio of stocks and bonds through a mutual fund company?
2) Park the 2007 deposit in a IRA/cd temporarily and later transfer to the usual stock/bond portfolio assuming recession arrives with lower share prices?
January 4th, 2008 at 9:17 am
To “Swim Upstream to Wealth” … WOW … putting money into the market IS gambling … pure & simple … you must be a broker
.