One Convincing Reason to Stop Investing Right Now Even If Stocks Are ‘On Sale’

Smart InvestmentsApril 8, 2021

One upside of the market downturn the economy is experiencing right now amidst the coronavirus pandemic is that one can buy more shares for their buck. However, not everyone is recommended to continue investing in the stock market at this time.

Liquid Cash

Pexel | Having a reserve of easily accessible cash can help secure a person from being blindsided by unexpected events

People who don’t have a lot of liquid cash right now are discouraged from continuing to use the money they currently have on stocks. This would prevent them from running short in the event that they lose their job. Instead, financial expert Ramit Sethi recommends people to focus their attention on and be more aggressive on building their emergency savings.

Speaking in one of his ‘fireside chats’ online, he said that money set aside for emergencies should be able to ferry an individual for a year considering the current events going on. This means pausing investing and even 401(k) or Roth IRA contributions.

Important Tradeoff

Unsplash | Sethi says that people should be willing to cut down their expenses to just the necessities

Sethi’s current advice is a departure from his previous advocacy for investing. In fact, he even encouraged people to do so early in his book ‘I Will Teach You To Be Rich’. He also recommended readers put their extra money in a retirement account. But he is now tailoring his tips to better equip people for a potential recession as some experts are predicting in the near future. This means prioritizing one’s financial security over the returns they can get if they choose to buy stocks ‘on sale’ when prices are down with the rest of the economy.

He also gave some practical tips for building an emergency fund. The process requires a person to calculate how much their bare minimum expenses for a month would and then multiplying the amount by 12. The total number is how much should be kept in the fund.

Keeping with the Plan

News Dome | The recent economic slump shouldn’t deter the rest of long-term investors

Meanwhile, those who do have the cash to spare should carry on with their current investment plan. Although nobody can really tell for sure whether the market is going up or down, missing out on the great deals available right now can mean not being able to enjoy the maximum profits one can get at the moment. In the end, long-term investors should not panic seeing their previous investments decrease in value as they can handle volatility in the long run.