Suze Orman thinks a market crash could be imminent — here's what to do
Suze Orman believes a market crash could be imminent - here's what to do
The stock market broke records last year while the real economy struggled in the face of the pandemic.
And this discrepancy makes experts a little nervous.
One expert, Suze Orman, would even say that she is now preparing for an inevitable crash.
And a famous measurement popularized by Warren Buffett - known as the Buffet Indicator - shows that Orman might be into something.
Here is an explanation of where the problem is coming from and some techniques you can use to keep your investment portfolio growing even if the market goes south.
What does Suze Orman think?
Media punch / Shutterstock
Suze Orman has been watching the market diligently for decades. She knows ups and downs to come, but what she sees in investment fads like GameStop has worried her.
"I don't like what I see in the market right now," Orman said on a video for CNBC. "The economy was terrible, but the stock market was developing."
While investing is now as easy as using a smartphone app, Orman is concerned about where we can go from these record highs.
And even with stimulus checks that haven't been finalized and the real estate market that broke its own records last year, Orman is worried about what will come with the coronavirus - especially as new variants keep popping up.
And given the time the market has soared, she feels like it's been too long since the last crash to stay that high for long.
"It reminds me of 2000 again," says Orman.
The Buffett Indicator
Larry W. Smith / EPA / Shutterstock
A metric Warren Buffett uses to rate the market so regularly that it was named for it, which flashes red long enough that market watchers wonder if it is an outdated tool.
However, the Buffett Indicator, which measures the ratio of the total value of the stock market to US economic output, continues to rise to levels never seen before.
And connoisseurs wonder if this is a sign that we are about to experience a serious fall.
Even Tesla boss Elon Musk is starting to feel scared. Musk recently asked the investment of Bigwig Cathie Wood, CEO of Ark Invest, if we should expect a crash.
While Wood initially brushed off any concerns, she told Musk that she would let her team take a closer look.
HHw to prepare for a rainy day
Freedomz / Shutterstock
Orman has three recommendations for establishing a simple investment strategy that will help you successfully navigate sharp market swings.
1. Buy cheap
Part of what makes Orman so upset about the fuss over meme stocks like GameStop is that it is completely against the interests of the average investor.
"They all got their heads screwed back," she says. “All you want is for these markets to keep rising. What use is that to you? "
She points out that the only extra money most people have for investing in retirement goes into their 401 (k) or IRA.
Since you probably don't intend to touch that money for decades, the best long-term strategy is to buy cheap. That way, your dollar will go a lot further now and leave plenty of room for growth over the next 20, 30, or 40 years.
2. Invest on a schedule
Katjen / Shutterstock
While she prefers to buy cheap, Orman does not recommend that you stop investing fully when the market is rising.
Again, she wants casual investors not to get too caught up in the daily ups and downs of the market.
In fact, cheering downturns now may be your best bet for a bigger chunk of very profitable investment - as some lucky investors did in 2007 and 2008.
"When the market fell, you couldn't buy things for nothing," Orman says. "Now look at it 15 years later."
She suggests that you establish a dollar cost averaging strategy where you invest your money equally regardless of market fluctuations.
This type of approach is easy to implement with one of the many investment apps currently available to DIY investors.
There are even apps that automatically invest your change by rounding up your debit and credit card purchases to the nearest dollar.
3. Diversify in fractions of a share
Orman suggests that you diversify your investments to avoid bad weather in certain corners of the market. Balance your portfolio with investments in many different types of assets and economic sectors.
Orman particularly recommends a partial equity investment. With this approach, you can buy part of a stock for a big-name company that you couldn't otherwise afford.
With the help of a popular stock trading tool, anyone with any budget can afford the partial stock strategy.
"The sooner you start, the more money you will have," Orman says. "Just don't stop, and when these markets fall you should be so lucky because your dollars are finding more stocks."
"And the more stocks you have, the more money you'll have in 20, 40, 50 years."
What else can you do?
goodluz / Shutterstock
Whether or not a big crash is imminent, investors who are decades ahead of their retirement can do so for them, Orman said on the CNBC video.
Prepare for the worst first and hope for the best. Since the outbreak of the pandemic, Orman has recommended that everyone have an emergency fund that can cover their expenses for a full year.
To prepare for a comfortable retirement, she suggests that you go for a Roth account, whether it's a 401 (k) or an IRA account.
This will avoid paying taxes when withdrawing money from your retirement account as your contributions will be made to a Roth account after tax. Conventional IRAs, on the other hand, are not taxed when you contribute, so you have to pay later.
When you find that you need a little more guidance, working with a professional financial advisor can help you head in the right direction so you can safely get out of market volatility.
While everyone else is off course or over-correcting, you are firmly in the driver's seat with your planned sunset years.
You should check here to buy the best price guaranteed products.
Mercedes "MJ" Javid Shares Update on Son Shams' Latest Milestones and Thoughts on Baby No. 2
Team Rubicon helps vaccinate veterans, Navajo Nation
Former NFL linebacker says he’d ‘throw around’ Tebow as a tight end
Arab-Israeli uprising: ‘This time it’s different’
Family of man killed with skillet devastated by Friday sentencing decision for murderer
Lori Harvey Works Out in a Tied-Up Tee, High-Rise Leggings & Chunky Yeezy Slides