What are your thoughts on the best place(s) to put your money during a recession?
For a:
- Mild recession
- Moderate recession
- Severe recession
If you are:
A. 30 or more years from retirement?
B. 20 or less years from retirement?
C. Already retired?
I think over time the best thing to do is leave it where it is.
I have been retired for about 9 years and on March 24th I finally realized I have enough excitement and moved about 85% of my money into a money market account and left the other 15% in the stock market just to make life a little interesting. I had a good 39 years of generating wealth and life is a little more boring.
I agree. Buy and Hold usually outperforms trying to time the ups and downs of the market.
Have you considered dividing a portion of the MM funds to some type of fixed index annuity to protect your principal from inflation with higher returns? The caveat is the surrender charges when you suddenly need every penny in that account (read the contract, YMMV)
I’m an experienced investor, in the markets since 1985. Here’s what I observe:
Most people have no idea how overly concentrated their S&P500 index fund is in the IT sector, and Mag 7 stocks in particular. Alphabet (GOOGL; GOOG), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), NVIDIA (NVDA), and Tesla (TSLA).
"The Magnificent Seven account for 35.4% of the S&P 500 as of the end of 2024. That’s nearly 3 times as much as in 2015, when they made up 12.3% of the S&P 500. " (The Motley Fool)
I think you will do better with an S&P500 equal weight fund, like RSP. I use GSEW, Goldman-Sachs Equal Weight. That means each company has a 1/500 weight. The Mag 7 will be 7/500, not 35.4%. My GSEW has fallen less than my SPY in the past few weeks.
I think International stocks are making the slow turn toward outperforming the US. I have the EWG Germany fund, and since 1/1/2025 it’s up 22%, but SPY is down -2%. It’s easy to understand… the US is basically implementing an austerity budget via DOGE, and that pull-back in public spending subtracts from GDP, and the US Federal Reserve Bank did cut rates. But Europe is deciding to do large military spending, and the European Central Bank just lowered rates, so European stock markets are on fire. China is up 21% since 1/1/2025.It may have bottomed.
Bonds are up 2 or 3% since 1/1/2025. The GLD gold ETF is up 2% since 1/1/2025.
Treasury Bills still pay 4.4% per annum.
There’s lots of things to invest in. The question is… is the investor able and willing to break their backward-looking paradigm of “only US stonks only go up but rest of world sux, bonds suck, cash is trash, gold is a worthless shiny rock”?
Is Recession on the Horizon?
In this episode, Liz Ann Sonders and Kathy Jones discuss the current sentiment in the market, contrasting consumer sentiment with investor sentiment amid economic uncertainty. They explore the implications of bearish investor attitudes and the potential for a recession and reflect on the anniversary of the COVID-19 pandemic’s impact on the economy. The conversation also highlights key economic indicators to watch in the coming week, including retail sales and Fed decisions.
Then, Liz Ann speaks with Kevin Gordon about the overall economic landscape, focusing on recession indicators, labor market dynamics, and the recent earnings season. They explore the implications of tariff policies on business confidence and the challenges companies face in providing guidance, given the uncertainty.
Kathy and Liz Ann also discuss the data and economic indicators they will be watching in the coming week, including the upcoming FOMC meeting.
On Investing is an original podcast from Charles Schwab.
The reality is that gains do not come proportionately from the components of the index. I think this is the case with most indexes…a few of the components make up most of the gain. Ran a quick portfolio visualizer on RSP and VOO for the last 10 years (limit w/o subscription) and the results do not back up your statement.
You don’t see equal weight outperformance because the last ten years is the S&P500 cap weighted / growth bubble. You don’t see a bubble when you’re in a bubble.
RSP started 5/1/2003, and since then it has consistently beaten SPY literally until the AI mania talk started in earnest in 2024.
RSP,SPY | PerfCharts | Free Charts | StockCharts.com
Since the AI narrative has come under question in the past few months, RSP has been beating SPY again, though both are down since 12/31/2024.
What investments are working right now:
non-US stocks (VEU)
gold mining (GOEX) and/or gold (SGOL)
T-Bills (SGOV)
US 7-10 year Treasuries (IEF)
what’s not working:
NASDAQ100 (QQQ)
S&P500 market cap weighted (SPY, VOO, IVV, SWPPX, FXAIX)
Run from anything Tech or AI, maybe own these below instead. Why? AI will totally change our lives, and… it’s totally overvalued. Both of those things are true.
Schwab dividend ETF (SCHD)
iShares US Minimum Volatility ETF (USMV)
I have owned SCHD for awhile and it is a great Large Value ETF with dividend growth as a core principal.