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How To Invest Your Money Long-term – Despite Rising Inflation And Impending Recession

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How To Invest Your Money Long-term - Despite Rising Inflation And Impending Recession

You are almost certain to hear some concerning news about the poor state of the financial economy every time you turn on the TV, read your newspaper, or read online news. Unfortunately, such gloomy stories have been quite prevalent lately.

The explanation for this is that the rapidly rising number of media outlets has increased competition for viewers and news consumers to unprecedented levels. Consequently, even clear-headed reporters from the BBC or broadsheet newspapers begin to overstate bad news instead of adopting a more measured professional attitude.

Simultaneously, that does not mean that the current situation is easy and pleasant. Indeed, nobody likes that interest rates are rising and inflation is high, not to mention the impending recession that, according to official predictions, could last for some years.

Nonetheless, it is far more important to maintain level-headedness, particularly when managing your money and planning long-term for a financially secure future. Read on and learn to invest.

Therefore, below are the top five tips to keep in mind when planning for a secure financial future. You are likely to find some of the main points I have shared here familiar, as they will be comparable to the points that I have shared with you and will continue to share with you in our review meetings.

#1. Always Plan Long-term When Investing Your Finances

For everyone, saving for retirement is an extremely long-term venture.

For this reason, we need to measure the financial snags we expect in the upcoming months against our investment goals. These investment objectives can be as far in the future as 40 years or more, allowing you to grow and accumulate wealth while working and an additional 20+ years as you enjoy your well-deserved retirement.

Therefore, you cannot afford to be constantly checking on your investment values and responding to short-term market fluctuations, as this will only cause unnecessary sleepless nights. In truth, investing your money over a lengthy period is the most dependable way to increase your wealth and secure your financial future, this is possibly why bonds are making a come back.

#2. Recognize That Inflation Rate Will Begin To Drop Soon

The inflation rate is one of the key indicators of economic performance.

Some of the factors that are increasing the rate of inflation to the current high levels include:

Hindrances in the supply chain and distribution sector, which are limiting supply in the midst of strong demand.

The war going on in Ukraine is raising the cost of energy.

Pent-up demand—this demand has accumulated over the COVID pandemic’s duration in all parts of the economy.

Undoubtedly, nobody knows when the war in Ukraine will come to an end; however, the government and various companies have begun to address supply chain challenges, and these efforts are beginning to bear fruit.

For example, the Bank of England (BoE) stated clearly in the most recent Monetary Policy Report that they are increasing interest rates in an attempt to arrest runaway inflation and bring it down.

From this chart sourced from the report, the bank expects inflation to fall sharply midway through next year as the rate moves towards 2%, which is the long-term goal.

#3. Remain Calm Amid All The Talk Of A Recession

As much as the Bank of England (BoE) expects the inflation rate to begin falling in 2023, the BoE projects that we are staring at an economic recession likely to last at least past mid-2024.

Without a doubt, a shrinking economy and reduced business activity are not the best economic conditions. However, if you are considering investing your money despite this outlook, a recent report from Vanguard Asset Management, one of the leading investment fund managers, gives credible reasons to be hopeful.

According to the report, the performance of the stock market is not directly correlated to the timing of recessions. Markets usually factor in recessions in their pricing and their value compositions even before they even occur, meaning the market starts to recover while the economy is still in a recession instead of delaying the recovery until the end of the downturn.

In addition, the report suggests that the timelines for recessions are usually shorter than your investment durations (study the point above).

#4. You Might Need To Adjust Your Income Strategy

If you are drawing money from your pension scheme or other investments, it could be time to review the amount of income you are withdrawing and where you are sourcing it from.

A high inflation rate has the undesired effect of lowering the purchasing power of your money, which is likely to increase your household costs.

However, it is not practical to make generalisations on this point since your financial circumstances are specific to you and there is no “one-size-fits-all” solution to this concern.

Nonetheless, one of the most important pieces of advice I would share with you is that if you have to review your income plan, it is best to seek professional advice before taking any radical steps.

Reacting excessively now is likely to impact you negatively in the long run; therefore, it is important to adopt a measured and knowledgeable approach when you need to manage your income.

#5. Do Not Interfere With Your Investment Strategy

You must remember that investing your money to plan for your financial future is a long-term venture.

By nature, markets and economies are often cyclical, meaning they experience ups and downs.

From the beginning of the century, we have had to deal with the dot-com bubble, the financial crash, and the unprecedented COVID impact that affected the entire world.

These three economic events caused market panic and a rapid decrease in investment values. The following chart depicts the performance of various diversified portfolios in the world with different amounts of equity composition. In each instance, you can see a recovery instantaneously after the downturn.

 

 

 

Mandeep Singh is an Asian Entrepreneur and Digital Marketer ✨ He was the Ex-CEO of Almond Media.

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