Welcome to Ask Clark, a column designed to answer your financial questions, by money expert Clark Howard.
We’re Nervous About the Economy and Are Putting a Hold on Our Investments. Are We Overreacting?
Joan from Georgia says: “We’re getting very nervous about this out-of-control economy. We’re planning to sell our property before any upcoming real estate crash. Also, we’re putting all our ETFs [exchange-traded funds], index funds on hold in this crazy stock market. Are we overreacting?
Clark’s Take on Whether You Should Put Your Investments on Hold Right Now
Clark says: “The economy is actually doing pretty well, but nobody knows how that’s going to sustain over time.”
He says that economists are nervous because the Chinese economy, which was the first to start recovering from the COVID-19 pandemic, has now slowed a bit. As a result, the Federal Reserve is currently taking a cautious approach toward stopping inflation because it doesn’t want to slow the U.S. economy down.
Overall, Clark says there’s reason to remain optimistic about the U.S. economy.
“We are not going in the toilet. There are no conditions right now that would say that’s where we’re headed,” Clark says.
Clark advised this caller, who’s in her 70s, that it’s ideal to be able to live on assets other than investment funds. But, he said, “If you need the money in your ETFs and index funds to live on currently, it’s not a great idea to have all your money committed to the market.”
“In your case, it would be better to reduce the exposure you have to the market by having three years of cash equivalence available to you to live on to cycle through a stock market correction or a bear market.”
Clark added that he doesn’t see any conditions that would predict an imminent real estate crash, so he doesn’t recommend making any extreme moves in real estate out of fear.
Here’s more from Clark on the status of the real estate market in the summer of 2021.
Want to save for a rainy day? Read our Emergency Fund Guide.
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