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Anonymous

18 Apr 2019

General Investing

Should I wait for the recession to happen or just ignore the inverted yield curve and upcoming recession and start investing?

I wanted to start investing but my colleague told me about the inverted yield curve and the upcoming recession. Should start investing or ignore my friend's advice?

Discussion (3)

What are your thoughts?

Luke Ho

Luke Ho

08 Apr 2019

Founder and Director at CFX Money Maverick Pte Ltd

Is your friend rich or a professional investor?

Typically as a general rule, try not to take advice from people who aren't necessarily more successful than you in a particular area. I don't mean this arrogantly, but you don't usually ask coal miners how to figure skate - you ask a figure skater.

In any case, while there's decent evidence for a potential recession, it's clearly not enough to determine how soon it might happen or if it'll happen at all. I suggest you stay invested. Timing the market is never as good as time in the market.

If you'd like funds that yield more than 9% annualized, you can always message me.

https://www.facebook.com/luke.ho.54

I think Hariz has already helped to summarize why the inversion of the yield curve is not necessarily the end of the world, which by all means isn't looking to be at this current moment either. My opinion is also that you should stay invested instead of staying out of it - Why let your money get slowly nibbled away by inflation? it wouldn't do anybody,especially yourself any good. And given that once the recession hits ,banks are going to be lowering their interest rate offers for saving accounts, so you won't be earning much from there either.

If you are looking to invest without the worry of thinking so much about what particular stock to buy that would be able to perform even in recession, I suggest looking to invest into treasury bonds before the recession starts. (which even at this point in time, I don't know when is it going to happen).

the thing about bonds is that the issuers are obliged to pay you unless they absolutely have no money to do so and go into default, in which case would spell terrible news for everyone to be honest. That is why you should maybe buy into ultra safe treasury bonds, which are government bonds from developed countries that provide decent coupon payments. The downside is that they won't payout as much as equities, but the upside is that in a recession, these coupons have to still be paid out to you, whereas for stocks, they are not obliged to pay dividends unless declared.

In recession, interest rates will fall as well, so you will be looking at better prices for the SG gov bonds you are holding since yours will become more attractive with a relatively higher coupon payment.

So all in all, if you are really looking to invest, but not so good at spotting the undervalued, winner stocks, perhaps look into the bond market instead. They offer a good place for protection of your capital against the otherwise gloom and doom of recession.

And I suggest you start soon, before everyone starts getting the same idea and push down the yields further!

Hariz Arthur Maloy

Hariz Arthur Maloy

06 Apr 2019

Independent Financial Advisor at Promiseland Independent

The inverted yield curve does not always mean a recession is imminent. Here's an excerpt from what p...

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