Unpacking 2023: how to start investing in a particular economic context

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Picture of Grégory Leclercq

Grégory Leclercq

Starting the year strong?

2023 has now officially settled, with the markets starting the year better after a few months of bleeding. The January rebound was particularly impressive with Bitcoin gaining close to 40% and the NASDAQ around 10%. February was more of a mixed package that leaves you to wonder if there is any logic behind it all. In fact, we have seen some categories such as precious metals, or stocks not particularly agree on which direction they wanted to take, and at what speed or magnitude.

 

Then came March. A month which is not yet over but brings back strong 2008 flashbacks. The announced bailouts of the Silicon Valley Bank as well as the Signature Bank and Credit Suisse’s dire financial situation is rightly scaring everyone into a new financial crisis only 15 years after the last one.

 

More surrounding context

A year into the Ukraine war, and with the mess caused by central banks and governments in the midst and aftermath of the pandemic, the West is left with a steady inflation that only shows signs of stopping in the discourse of politicians, or central bankers.

 

With some countries more affected than others, the hardest pills probably remain at high commodity prices. Both energy and food prices have been skyrocketing, hurting anyone’s wallet. As a consequence of that, people have been delaying their investment prospects. Those who did not previously invest perhaps had a hard time planning to get started.

What if I’m a newbie to investing in 2023?

What if I don’t particularly understand all the economic ramifications, or what if the financial markets all seem a bit too technical for me? What if I don’t dare jump ship when my expenses are already so high?

 

Here are a few principles that you might want to consider following if you are considering investing in 2023:

 

  • Pick a fixed budget every month, and invest on the same date. Set up a reminder and buy your asset or use an automatic order.

 

  • If you struggle with a fixed budget, try a fixed percentage of your liking of 1) either your income or 2) a sub-part of your income once you have settled important expenses such as your rent or mortgage.

 

  • Simplify your investment strategy by picking a handful of assets. Make it easy and rewarding.

 

  • Although diversification can be a wise strategy, it is not required when you just start investing. It is arguably more important to create the habit of investing and spending your few hundreds on the same asset(s).

 

  • You might also feel more at ease to start with assets that might already provide more diversification. ETFs are a good starting point for that purpose. They are the go-to for many passive investors.

 

  • That being said, buying Gold or Bitcoin alone for instance should not scare you. You wouldn’t think of diversification when buying real estate, would you? As you make the purchase, what matters is your belief in the asset, its characteristics, and its price. Then comes diversification.

 

  • Before investing, make sure to understand where and how you invest. Choosing your platform(s) is very important for peace of mind. If you are planning to buy crypto, or precious metals you have an extra incentive to research how to protect them. If you are buying stocks, bonds, or ETFs, make sure to understand the platform’s fees and conditions.

 

  • Forget about the economic context. Act as if it did not matter because you need years or even decades to truly profit from your investments anyway. Even if this feels unnatural, you will soon understand that the short-term does not matter.

 

  • If the first direction of your assets is downwards, accept it and be happy with the discount on your next purchase. It will all feel good in a few years when you buy at low prices. If you miss them, you’ll punch yourself in the face.

 

  • Remember that the hardest part of investing is tied to emotions. This is especially true when making the first step. 

 

  • It also does not help to open your app every day or week to check on your portfolio’s progress. With investing, less is often more. Remember, “go to the beach” if you can.

 

But what if a deeper crisis looms? What if I suddenly go underwater with the cost of living being too high? What if it’s the new 2008?

 

Good that you ask! In that case, it might be wiser to understand that:

 

  • No one knows when a crisis will happen, how bad it will get, or how long it will last. Don’t try to guess around it but make sure to know that in times of crisis, assets are often at a discount!

 

  • One thing is certain, don’t believe anyone who tells you that they know. Not even if they have the most impressive title. Chances are, they would have caused the problem themselves. Trust YOUR process, YOUR research, and YOUR long-term strategy.

 

  • Know that if you suddenly need to readjust your investment budget towards the downside, or even stop with the investments for a while, it is still a good thing to have been able to invest to the best of your ability. In fact, “time is really much money” when it comes to investing as soon and as much as you can. So don’t blame yourself for needing to adjust things as you go.

 

  • In terms of fearing the worst, if something happens and I need to spend money urgently, we always recommend having an emergency fund. An emergency fund should be entirely distinct from your investments and have a sufficient financial cushion to support a few months of unemployment. In other words, your assets can be sold if you are in financial turmoil, but it is better if you avoid it. It’s also wiser to sell non-assets at first if you ever need to sell anything.

 

It’s certain that although the fear of a financial crisis—and high inflation—is legitimate, investing in assets is one of the best ways to ensure that you are protected over the long term. In a time where cash might be useful but loses value quickly, and where the markets send contrary signals (stocks going down, alternative investments going up), a mixed exposure would ensure peace of mind. See cash as something that gets you out of short-term problems, not long-term ones.

 

I hope that from this you understand that not even 2023 should scare you into not-investing. It is highly important that you realise that we are still here for a long time and if you do not start now, you are potentially losing great opportunities to accumulate and start building your net worth. After all, it’s all a big game of Monopoly.

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