The world has changed dramatically since the time I wrote “Stocks vs. Cryptos.” That was over a year ago, and the stock market and crypto markets were much higher.
Since the Federal Reserve has raised interest rates to curb inflation, it may also drive the economy into a recession. There seems to be a lot of doom and gloom around the world currently.
It’s not all bad. Although your portfolios may be down, there is still a silver lining. Investing in the down markets is the best time to increase your future income because everything is on fire-sale prices.
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Today, I want to look at where you may want to invest your hard-earned money so you can reap the benefits tomorrow and thirty years from now.
Growth vs. Value. In both the stock and crypto markets, you must understand the difference between growth and value investments.
Growth stocks and cryptos are most likely speculation plays, meaning you invest in their future prospects, not their history.
Some growth stocks can be Palantir, Zoom, and Shopify. In the crypto-verse, we refer to growth coins as Altcoins. These are highly speculative in nature; you are rolling the dice on these.
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With stocks and cryptos, you want to keep your speculation budget low. It may seem nice to purchase these beaten-down growth prospects at a discount; however, you can spend your money more wisely on known quantities.
Value products. When we say the word value, we look at stocks and cryptos with a history. In the world of stocks, these are dividend-paying companies and ETFs. They have a long track record of paying shareholders via dividends.
For crypto, we are talking about the mega smart chains and Bitcoins. These are the most prominent crypto products on the market, including Ethereum, Polkadot, and Cardano.
When you see these mega products on sale, you’d be wise to buy as much as possible (within your speculation budget). During bear markets, you can accumulate a majority of your wealth. It’s essential to remain calm, rational, and make intelligent decisions.
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How to prioritize your investing. Now, we have to prioritize our investing habits during this downturn. Let’s assume we have $1,000/month to invest in the markets for this article.
Right from the beginning, I would allocate $900 to stocks and $100 to crypto. If you are younger, it may be $800/$200. As exciting as crypto feels, it is still speculative.
I am an income investor, which means I want to build a paycheck today. However, it is still a great time for other beaten-down instruments.
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I divide my stock marketing investing into index funds, dividend growth, and income investing. I want to ensure I take advantage of all three types throughout the bear market.
- Index funds. When markets are down, index funds are a sure bet. You can buy in low and wait patiently for the comeback. You can’t lose by buying the Total Market Fund (VTI), S&P 500 (SPY), Nasdaq 100 (QQQ), and Dow Jones Industrial Average (DIA).
- Dividend growth. Investing in dividend growth companies like McDonald’s (MCD) and Johnson & Johnson (JNJ) will make you rich in the long term. You can dollar cost average and reinvest dividends to build a massive portfolio.
- Income Investing. My favorite type of dividend investing. Here you buy high-yielding products at beaten-down prices. This can get you yields over 10%. Caution: this type of investing is not for the faint of heart. Buying closed-end funds like Pimco Dynamic Funds (PDI and PDO) can be risky if you don’t understand the product category.
I can divide my crypto investing into three categories: stablecoins, smart chains, and altcoins.
- Stablecoins. These coins are solid ways to earn interest. However, during a downturn, I wouldn’t allocate money towards USDC because it won’t give me capital gains over time. The price is always $1.
- Smart chains. I would give the lion’s share of my crypto budget to L1 products such as Ethereum (ETH), Polkadot (DOT), and Cardano (ADA). Of course, you want to add Bitcoin regularly as well.
- Altcoins. You may want to dabble a little with altcoins. You can hit it big by purchasing coins under $0.01. They can be a fun way to spend $5-$10. However, I wouldn’t invest more than that in these coins. An example of an Altcoin is Chainlink (LINK).
Putting it all together. So we have multiple competing investing priorities—how do we spend our cash? You should have a general investment allocation policy, but you must remain fluid.
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Every day on the market, new deals become available. I track the markets daily and formulate my final plans a few days before I get paid.
For example, you may allocate $200 for dividend growth products, but income products have a better sale on payday. The main thing to remember is that investing in anything is impressive.
Most people will never invest, so don’t overthink it too much. You will win if you avoid investing with your emotions.
A quick $1000 spending spree. Let’s go on a quick $1,000 spending spree so you can visualize how I spend my cash.
Conclusion. Keep your wits about you during the downturn and subsequent recession. Things will look up in the future. In the meantime, exploit great deals in stocks & cryptos.
If you can remain calm, these are the best buying opportunities over the next 4-5 years. Market volatility and fear are where actual investors shine.
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Warren Buffet says, “Be fearful when others are greedy, and greed when others are fearful.” Live by the principle, and you will do fine in the markets.
Do not take unnecessary risks. If you have a choice between a beaten-down growth stock or an index fund, choose the index fund. Maybe divide your budget 90% to the index fund and 10% to the growth stock.
Yes, it is sexy to double or triple your money quickly, but it is much better to have “long money” and remain in the game your entire life. That’s where the power of compounding truly takes effect. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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