7
/ Wednesday, June 15, 2022
Should an Amateur Investor Buy into a Bear Market?
For most, investing is more than landing ‘a great deal’
I
Zoe Landi Fontana, The Weekly Journal
f you’ve ever walked into a store, seen an item on sale, then bought it just because it was offered at a discount… congratulations, that was an impulse buy – a FOMO (fear of missing out) purchase. In a bear market like the one we’re seeing now, an amateur investor might be tempted to impulse buy their way into the stock market. One expert says ‘don’t do it’. A common phrase in investing circles, “buy the dip” explains this exact phenomenon as it plays out in financial markets. It sounds attractive - buy when markets are low, then when they bounce back up you’ll have a high ROI. Yet, “buying the dip” isn’t a realistic investment strategy for most.
How To Responsibly Invest As A Layperson
“Professional investors – some buy the dip, and some are holding really tight. The non-professional investor does not want to [try and] time the market. Their best investment strategy is to have a set amount to invest every month regardless of how the market is doing,” explained Mara Liz Meinhofer in an interview with THE WEEKLY JOURNAL. Meinhofer is a CPA and Personal Finances Expert at Financial Clarity Academy, the leading online financial academy in Puerto Rico. The Financial Clarity Academy seeks to increase financial literacy on the island, where it is desperately needed. They focus on providing education around personal finance to average
people, so they can achieve financial stability, save Of the 450 participants surveyed, the 40-49 year more, and start investing smart. old age group was most worried about finances. Of investing responsibly, Meinhofer noted, “It is “They’re right in the middle. They already have great to try to buy when stocks are low, but there are financial responsibilities (children, mortgage, car) some steps [people] need to take first.” That first step but they might not necessarily have a positive is to organize your personal finances. Have three to outlook on increasing their income. Contrary to six months of expenses in savings, eliminate any high the younger ones who believe they have time, and interest credit card debt, then choose a fixed amount have hope,” Meinhofer elaborated. to start contributing into a 401K. The study, conducted from 2020-2021 during If you’ve got your financial foundation together the pandemic, showed that 50% of participants and more than a few months’ worth of expenses had less than $1,000 in savings. Another 70% in savings, you might be ready did not have the equivalent to enter the market. “If you’re of three months’ worth of young, start investing ASAP. expenses in their savings account [Young people] have a longer - the minimum amount to be outlook, they can survive the ups considered a ‘safety net’. and down,” advised Meinhofer, About 95% of Puerto Ricans Credit card “We tell our students everything have some sort of debt, while debt makes up 68% happens in cycles. We are in a in the U.S. this number is 74%. of personal debt on challenging cycle at the moment, Credit card debt makes up 68% the island, whereas but don’t despair, in history of personal debt on the island, in the U.S. this everything eventually bounces whereas in the U.S. this number number sits at 45%. back up.” sits at 45%. “Living paycheck to paycheck, [they have a] cash flow problem. So, they balance their Financial Wellness In Puerto budget using a credit car. Getting Rico a financial education can guide Unfortunately, many people won’t have an them on how to better manage their cash flow,” easy time building a strong financial foundation, explained Meinhofer. which makes it more difficult to save, and almost Formal financial literacy classes are rare in impossible to responsibly invest. Puerto Rico, and while Meinhofer admitted While the pandemic raged on, it was clear that that education isn’t the solution to all financial average people were suffering economically, but a problems, it is one effort that can reach many study conducted by The Financial Clarity Academy, people and impact them directly and immediately. revealed just how severe the situation actually was. Currently, Congress is working on legislation to “We knew they were having a really hard time, but increase financial literacy amongst students and even in the Academy we didn’t know it was this to establish public policy that will provide financial bad. It was – and continues to be worse than – we education to workers in Puerto Rico. think it is,” said Meinhofer.
In fact,
