Intro:
The whispers of an impending recession, underscored by signals like the high Buffett Index and the soaring PE Ratio of the S&P 500, place many of us at a crossroads between apprehension and opportunity. This post delves into my strategies and reflections as I steer my investments amid the looming shadows of a potential recession.
Facing the Unknown
For small individual investors like myself, the prospect of a recession can be daunting. Especially with a new family addition on the way, the primary focus becomes financial stability. But there’s a silver lining: downturns often herald opportunities to snag assets at bargain prices. But how deep will the market dip? Even luminaries like Warren Buffet confess the challenges of predicting market trends.
Balancing Time and Money
In our fast-paced world, keeping tabs on every investment trend is an uphill battle. But here’s a thought: the rewards from professional success might outweigh potential investment gains. Instead of diving into market complexities or taking high-stakes gambles with a limited investment budget, I’ve paved a unique path for myself.
Prioritizing Debt Clearance
My partner, Eunji, and I have a substantial student loan tally from our Master’s courses, coupled with undergraduate debts. As the COVID-19 Forbearance chapter closes, it’s clear we should gear up to settle this debt, side-stepping new financial liabilities.
Embracing Automated Investments
Wealthfront is my chosen platform for investment tasks. This shift to automation means I can zero in on my job and personal life, letting my investments evolve organically. Given the possible market storms ahead, I’ve tweaked my portfolio: a slide from a 90% VTI allocation to 60%, and upping my US short-term treasury bonds from 10% to 40%. I’ve also embraced the dollar cost averaging (DCA) strategy, backed by regular monthly deposits. Plus, I’ve reserved a chunk of cash with Wealthfront, reaping a 4.8% APY. Their automated bond portfolio, boasting a 5.75% yield, has also caught my attention, though I tread with caution given its risks and minimal interest rate edge. I also have Traditional IRA and ROTH IRA accounts with Wealthfront with the amounts I roll covered from my previous employer’s 401K plan.
My Affinity for Wealthfront
Key reads like “The Intelligent Investor”, “A Random Walk Down Wall Street”, and “The Warren Buffet Way” have moulded my investment outlook:
- Active investing calls for commitment and dedicated research
- Despite their vast resources, many Wall Street fund managers fall short in trumping the market. And mutual fund fees? They can eat into your gains over the long haul.
- My trust leans heavily towards the US financial market over many of its global peers.
- Emotions? They’re an investor’s downfall. Hence, the draw of emotion-detached, automated processes.
- Market timing remains elusive, even for the pros. So, DCA is my go-to for sustained growth.
- Short-term investments? Not my cup of tea.
So, it was a no-brainer to hand over the reins to a low-fee (0.25%), tech-driven advisor like Wealthfront. My path forward?
- Excel in my profession to boost my income.
- Stick to a consistent, long-term investment game plan.
- Keep those daily market price glances in check.
- Venture into tax-savvy investments, real estate being a prime candidate.
In a Nutshell:
My roadmap for the years ahead is clear-cut:
- Debt clearance sits atop the priority list. New debts? A strict no-no.
- I’m all in for automated investment tools. (at least for now)
- My focus? Career growth and never-ending learning.
If anyone is also interested/considering in using Wealthfront:
Please use it after your own dedicated research. Here are my referral links: