Survival Handbook

April 18, 2022, 9:55 am EDT

Survival Handbook

It is important to have a survival guide in your hand before disaster arrives. By doing so, we are prepared for the worst-case scenario. Dealing with struggle and shaky stock markets, here is a brief reminder as a survival guide for both investment and financial well-being. 

  1. Having Enough Cash at Hands: cash is the king in the tough time both for investment and survival. If you do not know how to operate your portfolio in a bear market, then selling stocks and holding cash is the best strategy. About 90% of people will lose big in the bear market, you will become a rare winner by staying flat for your portfolio. Enough cash means 6-12 months of money to survive when the income is not available. Lay-off, business shutdown, or disaster may force you to stay alive without income. Therefore, trying to save as much as possible is essential. 
  2. Saving: During the bull markets like the past 13 years, people forget the value of saving habits. But, the economic conditions are cyclical in nature. It means that bulls and bears take turns to come. Therefore, cut unnecessary purchases and save as much as possible. As mentioned in the previous point, you need to have 6-12 month cashes to live for the basic need like eating, drinking, and caring for your loved ones. 
  3. Investing in the key assets: Investing and making profits during the bear markets are still possible. But, one needs to be very careful in selecting holdings. Precious metals like gold and silver are useful to deal with inflation. Food-related stocks like supermarkets or packaged foods are also capable to go through a tough time. Moreover, low-price or discount retailers are worth attention like Dollar Tree (DLTR), Walmart (WMT), and Costco (COST) may be able to hold strong since people need to buy necessary items with minimal cost. 
  4. Finding special industries: Specialized industries may do well when a bad time comes with certain conditions. For example, war-time will help the defense industry. Diseases like pandemics may boost certain biotech, pharmaceuticals, hospitals, etc. Natural disasters like food shortages or droughts may benefit packaged food or water providers. 

Although the worst case may not happen often, it would be better to prepare in advance. Currently, 40-years-high inflation, coming rate hikes, balance sheet reduction, Russia-Ukraine war, aggressive China behaviors, and potential food shortage, are examples of likely troubles.  Hopefully, we are ready to survive when the bear arrives.

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