With banks failing and a recession looming, many are wondering whether they should invest while the stock market is low or save money. During a down time in the economy, cash is the reigning queen. Understanding your business’s cash flow is going to be of a vital importance to keeping it alive during a recession.
In a typical economy, the typical recommendation is to save at least 3 months to an emergency fund in a safe but higher yield fund, like a money market. However during a downturn in the economy it is advisable to save up to 6 months if you are able to.
A business emergency fund should take into consideration all of your expenses, including payroll for yourself. But also having a personal emergency fund will help if your business loses clients and can’t pay you.
Once you have that 6 month emergency fund, it is best to talk to a financial advisor about investing in a broad portfolio, like a combination of index funds, bonds, stocks, and mutual funds. Make note that you should limit your investments in new technology and more volatile markets, like crypto and NFTs, to no more than 10% of your portfolio to make sure that you don’t lose it all in a downturn.
If you have questions, contact Paragon today!