There are signs everywhere that we are headed towards an economic downturn. In May, the S&P/TSX composite index dropped below 20,000 for the first time since June 2021. On June 13, the S&P 500 fell into a bear market—a 20 per cent decline from January. Inflation is at a 31-year-high of 6.8 per cent, and on June 1, the Bank of Canada hiked interest rates 50 points. In the United States, the yield curve inverted in March—an indicator a recession may be coming.

It would be easy to look at these facts and freak out a little. The world is still facing an ongoing war in Ukraine, tech stocks aren’t as strong as they were during the height of the pandemic and governments worldwide are fighting inflation. Combined, this can be a challenging market for investors.

But as the Hitchhiker’s Guide to the Galaxy says: don’t panic. You can still hang on to your investments, and, with a little patience, maybe even make some money in the stock market.

What should I do with my investments right now?

While it can be tempting to make a rash decision based on dropping share prices, think before you act. Certified financial planner Jackie Porter says that markets are a snapshot of how people are feeling day-to-day—and it’s not a good strategy to make investment decisions based on emotions. “Greed and fear have way more of an effect on the markets than people realize,” she says, explaining that even though people may see all the bad news and start selling, it doesn’t mean you should.

Porter cautions against knee jerk decisions. Instead, look closely at the companies you’ve invested in by reading their investor relations documents and educating yourself about their industry. What are the future earnings potential? What’s the stock price relative to earnings? How has the company done year-over-year in the markets? If, long-term, those indicators are rosy, it makes sense to hang on during a dip.

It could also be an ideal time to diversify your portfolio. If you have any stocks that are selling for high amounts right now, cash-in some of them and spread your money to less volatile stocks that are likely to pay a steady dividend, like utilities or banks. “Use this as an opportunity to grow your money safely,” says Porter. 

However, if you sell at a loss, Porter says you are guaranteeing that you won’t grow your wealth. “These drops in the market lead people to feel like they have to do something,” says Porter—but the golden rule of investing is to sell high and buy low.  

What investments are the best to have during bumpy periods?

Faisal Karmali, a senior wealth advisor and portfolio manager with CIBC Private Wealth, says stock markets are the only markets where people want to sell something when the price goes down. For him, it’s an opportunity to look for great investments at a good price. 

If you are going to invest now, Karmali says to consider what financial goal you are working towards. “Are you looking to purchase a home, or are you saving for retirement?” The longer the timeframe you’re working with, the more it makes sense to put your money into less-risky investments, like an ETF or index fund. But if you need money sooner, you may have to expose yourself to open markets, which might be risky—Karmali suggests instead you consider a savings account or short-term guaranteed investment certificates (GIC). That way, you can access your money when you need it without worrying about the volatility of the market as much.

But if you’re still hungry to invest money into riskier stocks like cryptocurrency, do your research first. Cryptocurrencies have been crashing in recent months: In November, bitcoin hit an all-time high of nearly US $70,000, but as of June 14, it sat around US $22,000. “Those who have the appetite need to understand the risk of loss and how much you can lose,” says Karmali. 

It can also help to speak to a professional investment advisor. It’s someone you can bounce ideas off of, and help calm you when you are worried about the market. “Every professional athlete has a coach,” says Karmali. “Investors will be much better off if they get the proper advice.”