Tips From Ex-Wall Street Trader

  • Many people see these downturns as times of fear rather than investment opportunities.
  • A bond or real estate trust is an investment that can transform your portfolio, says Vivian Tu.
  • You can also increase your monthly contributions to your 401(k), he added.

“It was the best of times, the worst of times, the age of wisdom, the age of folly,” read the famous opening lines of Charles Dickens’ “A Tale of Two Cities.”

The quote opens the book to a theme in the story, which highlights the contrasting experiences of rich and poor, and is framed in the context of class warfare. On one side, there is despair and on the other side, there is joy and hope. It contrasts with the popularity of the French Revolution between the cities of Paris and London.

“It’s a popular idiom that compares the duality between two people or places or something similar,” says Vivian Tu, CEO and founder of Your Rich BFF, a financial education company that publishes magazines and share advice on various social media. platform. He has amassed 2.1 million followers on TikTok, where he creates short videos about financial literacy.

He uses the analogy to draw parallels with today’s economic environment. On the other hand, inflation makes everything more expensive while the fear of recession. If you’re living paycheck-to-paycheck or dependent on paychecks, it can seem like a scary time.

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On the other hand, many see the recession as an opportunity to build wealth. Some may invest in the private market or buy distressed companies, while others invest in real estate. For example, if someone had a small amount of money saved during the 2008 financial crisis, didn’t panic about real estate, and bought property, they could see their investments grow over time, he noted.

Tu began his career in 2015 as an intern at JPMorgan before becoming an equities trader. But he ultimately pushed his career on Wall Street to help others understand finance and personal investing.

One message we want to spread today is that recessions are part of the boom and bust cycle that is very common. Over the course of an adult’s life, especially during your working years, you may experience three to five recessions, he says. They generally appear every five years or so.

Many people see these recessions as a time of fear, not an opportunity to invest in stocks when share prices fall. And if no one can predict where the bottom will be, you can continue to invest regularly on the way down and even on the way back up, he said. Over time, you will lose your average investment completely.

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A few simple pivots

If you’re more risk-averse, or nearing retirement, a good option is to invest in Series I bonds, a type of U.S. Treasury bond that can insulate you from inflation, says he noted.

Another option is a real estate trust. Real estate isn’t directly linked to the broader stock market, so it can be a good way to leverage assets that can provide you with cash flow, he added.

Tu doesn’t recommend trying to be an investor or betting on ETFs or mutual funds that are heavily weighted in one sector. Every recession is different and we don’t know how this one will play out or which companies will survive the turmoil. Therefore, it is better to do diversity, he pointed out.

Once you have a full emergency fund, it’s time to switch to investing in broad-market funds, whether for US or global equity, he said.

“[If] “You still have a safe deposit where you’ve taken out debt or bought products that you may not need, it’s a good time to turn that budget into something that will literally be a gift that gives and pays you in the future,” said Tu.

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He continues to invest in the Vanguard 500 Index Fund ETF (VOO), which tracks the S&P 500. He’s taking advantage of this opportunity to top up his 401(k), which is a common plan for business owners with no employees.

He also participates in the backdoor Roth IRA, which is a strategy that allows investors who make more than the income limit for a Roth IRA to contribute to a traditional IRA and then roll over the contribution. to a Roth IRA account.

“Right now, we’re in a time where investors can invest a lot because they don’t have to buy full shares,” Tu said. “They can buy shares in shares. So no matter how much money you have, you can put it in public money.”

However, if you don’t have a lot of money to invest, what you give may not change what you want, he notes. For this reason, it’s a good time to consider a side hustle or a side job for that extra income. These will give you the cash flow that can turn your investment into more meaningful money later on, he said.

And, if you have a 401(k), there’s no better time than now to increase your monthly contributions, at least to meet your company’s match, he added.

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