How to Protect Your Finances During Rocky, Uncertain Times

Posted in Investing on March 16th, 2020

There are rocky times we’re living in. Uncertainty has pushed the markets to their limits and the world economy looks like hanging by a thread. Does this mean you should really fear for your finances during these times? Actually, the first thing you should fear is fear itself.

After the first panic moments, it is time to put fear aside and take a closer look at what has been happening on the markets and how to potentially guard your investment portfolio against the current turbulences. It might also be a good period to make some money, also.

What Is Happening on the Markets Right Now?

Global stock markets have fallen in the past weeks. From London to Japan and the USA, the markets have seen some big, worrying declines of up to 13%. The Dow Jones Industrial Average Index (DOW) plunged 10% on 11th March. It looks like its worst one-day drop in history and many are fearing the global recession is nigh.

Some of the most affected are the travel companies and every counterpart involved in it.   For example, airlines are facing a multi-billion loss, with the likes of  British Airways cutting 432 flights, or Ryanair expecting to drop almost a quarter of their flights.  Tough times. Moreover, fuel price has fallen as well, as the demand for fuel is expected to decline in the following weeks and as the price war between Russia and Saudia Arabia continues on.

In the USA, almost all of the oil producers’ stocks in the S&P 500 were down more than 30 percent.  Apache Corporation saw more than a 40 percent drop and the largest oil producers like Exxon or Chevron also suffered between 12 and 15 percent drop.

However, there is a safe harbor that many investors are rushing towards: gold. There is something about this yellow metal that make us all value it so much, especially in tough times when money cease to value what they used to. So, maybe this is why gold has passed the $1,700 barrier for the first time in 7 years now.

No matter how these indicators would change, any financial crisis will have something similar: the tiring fluctuations of stocks which you need to follow closely. What to do with your investments in these rocky times? Let’s see!

What Should You Do to Protect Your Investment?

This state of affairs looks like it will be here for a while, so waiting for the tide to pass might not be the best solution right now.

Sit Tight and Avoid Panic!

If you are writing various product reviews online and getting paid through an Amazon affiliate program and you love it, keep doing that. It’s best to keep doing the normal things that make you happy, so panic won’t find its way in that easy. The most important thing in these times is to avoid impulsive decisions based on fear, like panic selling everything.

If your finance plans are for the long-term, then you shouldn’t be put off by this crisis and you should keep investing carefully, yes, but keep at it. In five years’ time this will be all gone and you’ll thank yourself that you hadn’t lost your head in the madness. The markets will recover eventually and while you should not overlook the current turbulences, you should also keep your head clear on your goal: long-term investment. If you sell now in a fit of terror, you’ll just cash in the losses and miss on what will come in five years.

Write Down Your Long-Term Goals and What You Are Most Afraid Of

I know, you can get restless in these moments.  So, to keep your mind at work, you can take a few moments to rethink your financial long-term goals. Ask yourself what you want to achieve, financially speaking. See what you can actually lose and what you can gain in the near future. Make a few simple calculations in accordance with your re-established goals.

Make Sure You Do Not Have All the Eggs in the Basket!

As funny as this might sound, it is one of the oldest rules in the book. Having a varied portfolio of investments means you are more protected in case markets go south like in these times. A recent study shows that diversified portfolios have only a 35% rate of decline during the financial crisis, compared to all-stock portfolios which can take an almost 50% drop in value.

Most investors find a safe haven in gold in rocky financial times. It would not be bad to have 10-15% of your portfolio in gold. If you’re new to gold as a means of investment, you should know not to waste time buying physical gold. There are other safer ways to do that, like gold ETF or gold sovereign bonds.

As you can see, rocky, uncertain economical times do not mean the end of your investment. You just need to keep your head clear and put panic under lock and key. If you’re investing for long-term, then it should be no problem to go through these difficult times.

Author bio

Having achieved success in real estate and investing, Richard Swarbrick now shares his knowledge with his readers

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