The direction of the market today
We have seen tremendous recovery in the stock market since the great crash of 2008. Stock prices have gone back up, and investors seems to have a positive outlook. The news reports point to good days ahead and hopes are high. But is this what we can expect to continue? The news is influenced by many things so can it really be trusted? I have followed numerous economists and financial advisors that have predicted the 2008 crash and they are all very pessimistic of the data coming out about where we are heading. I hope to illuminate some of these things and help you find some investments that can withstand the storm.
The devaluation of paper currency and inflation
This is something dangerous that has been happening lately all across the world. Countries such as Japan, Greece, even here at home in the United States, are rapidly printing money to try and fend off problems in the financial markets. This has two very negative ramifications. One being that it artificially props up the stock market giving a "false high" in a sense, so this Dow being at 14,000 isn't necessarily the truth. The other is it causes very high inflation, or hyperinflation, and the rapid devaluation of our currency will lead to things like in this picture. Your dollar holds less and less value the more we print money. How can we afford to buy a gallon of milk at massive prices? It's not that the price is really different, it's that our currency continues to devalue so it seems as if the price keeps going up.
What, then, should we do to protect our money?
After seeing all this negative, what should we do to protect ourselves from inflation and further market descents? We start by finding investments that act as a hedge against inflation and give us more security so that we can stand against any potential downturns in the market with the way reports are coming in. Here are two stock investment methods that I myself, along with many other investors have gotten involved with to protect ourselves and save money for the future.
1. Strong dividend paying companies
This is my top strategy for stock investing because the companies that pay dividends are popular among income investors and isn't extremely volatile like growth or value investing. This is because most people that invest in companies that pay good steady dividends aren't after the price of the stock, but the dividend to either reinvest and get more shares or cash out and live off of. I can't stress this enough that you have to find companies that have a long track record of paying a dividend and the company is continuing to do well so the dividend will likely continue. This is very safe against the wide swings of the market and to protect yourself if you choose to stay in the market.
2. Diversified portfolio of well established companies
This is the other strategy I suggest you employ if you choose to invest in the stock market or choose to stay involved. Many people follow the latest fads with new emerging companies but this is not recommended if you're looking to stay safe. Look for companies that have been around for a while and have very good balance sheets. Be wary of these reports, some companies that have been around for a while could be struggling due to economic tough times so pay particular attention to their cash on hand vs debt and ROI to see if it's worth your investment into their stock.
Other options for protection?
There are numerous avenues you can take to protect yourself from inflation and the devaluation of our currency, but this article simply went into detail about how you can protect yourself in the stock market. I highly suggest you look into investing in gold and real estate as these can also act as a hedge against inflation, but that is for another time. In the meantime, good luck in your investments in the stock market and don't forget to have fun with it!