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Where is the safest place to invest your money in a recession?
Simple question right? I am not watching the market everyday trying to time it. I’m an average young professional looking for long term growth. Currently I am investing in my tax deferred 401k at my company, my Roth IRA, Brokerage account, and MMA.
Within these accounts is there a sector which would protect what I currently have for a while? Foreign, Bonds, MMA etc. Saving my money in my MMA is almost a wash with the rate of inflation. I am getting about 4% APY, and inflation seems higher than that. My funds in my IRA, and 401k have gone down about 15-20%. Do I just sit tight and hope for a rebound? or do I move into safer funds for the time being?
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sergik12
at 10:17am on Aug 25, 2008
A lot of people that I know have moved into cash or TIPS. I have an inflation protected fund in my 401k that I’ve taken a position in. Otherwise I’m just looking for good buy opportunities.
pbucelwicz
at 03:05pm on Aug 25, 2008
Does moving into cash really help you? Are the rates better than inflation?
What are TIPS?
sergik12
at 03:11pm on Aug 25, 2008
Well think of it this way if you were long SP500 on OCT 09,2007 when SP500 was at 1565 you would have saved your self 17.4% since SP500 closed at 1292 on friday, if you were all cash since OCT. You would also be able to now buy in at a significant discount. By moving to cash i don’t mean holding bags of cash or moving the money to your checking account. By cash I mean bying a CD.
Treasury Inflation-Protected Securities (TIPS)
Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater.
TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation.
You can buy TIPS from us in TreasuryDirect and Legacy Treasury Direct through non-competitive bidding. Starting in January 2007, the 20-year TIPS is no longer sold in Legacy Treasury Direct, but it continues to be available in TreasuryDirect.
pbucelwicz
at 04:15pm on Aug 26, 2008
Oh nice, I see. Move to cash investments, CD/MMA for the short term while you wait to buy in when the market starts to come around again?