WE are not yet entirely out of the war against the pandemic. People all over social media are fighting left and right about what political color to support in the upcoming election. Then suddenly, Russia and Ukraine crisis broke and continues up to this date. With all these events, we cannot help but think about how to preserve our wealth when the Four Horsemen are on the loose?
Millions of investors around the globe are seeing their portfolios wiped out this year if they do not know how to play it. Of course, everyone intends to invest money to win, and winning in any game requires a game plan. But as I have seen in many cases of my financial coaching program, the only investing principle that guarantees success is opportunistic investing.
Many are afraid right now that they might lose their money. However, realistically speaking, the only thing you can be very sure of is when we go into a war, the value of money usually goes down. And protecting your wealth is like putting it in a bunker that will not only preserve it but also allow it to grow while inside that bunker.
For that reason, investors are running towards a haven, like putting their money in government bonds, for it lowers the risk because the government guarantees the repayment of the principal plus interest. Some advanced investors buy gold because it is a tangible asset not affected by interest rates. While they choose to place their money into savings even with low interest, it can help them maintain the principal.
With this new environment, we can expect that market will continue to be uncertain for the next few months. If you are afraid and confused, you are not alone.
As investors, we know too well that volatility is part of the game, whether it is war or time of peace. That is why it is a good investment to have an alternative asset that will add to your diversification, which will then help reduce overall portfolio volatility. And now is a good time for you to check the health condition of your portfolio.
Is your investment well diversified? Investment performance is usually not about the timing but rather how well you allocate your assets. Of course, it is good to own local stocks, but you are free to also explore foreign stocks, bonds or commodities.
Do you have a well-funded buffer fund? Many investors forget that. Like any investment, cash is also a position. Having enough cash will give you the chance to take advantage of the opportunity that life may throw at you. This cash should be separated from your emergency fund. It is a good practice to at least have 10 percent of the cash position ready to take command at any given time.
Are you buying financially sound companies? While there are many considerations for a company to consider financially sound, checking their earnings and Return on Equity are two of the best ways to study. Yes, some companies, unfortunately, go bankrupt. But the ones that maintain strong balance sheets and strategies ride out storms.
Those questions are only the things you need to be asking by now. It is about time for you to check your potential losses to know the proper approach to avoid total catastrophe: How much loss can you withstand? Will you be able to sleep well at night? Do you have enough time to recoup your losses?
The truth is, no one knows where this event will lead us, and how the market will move in the short term but expect that heightened volatility will carry on.
Investors who matured by their various market crash experiences and rash mistakes now learn to let go of their loser mentality and avoid impulsive investing. In the end, you will realize that this is all about proper money management.
It takes both learning from your own experience and others. I was lucky because I experienced all those mistakes early on in my career and was willing and able to bounce back stronger.
Yes, it is okay to be fearful, but this should not prevent you from doing something significant, not only with your money but in all aspects of your life. Remember, our fears are not in control; we are.
Christopher Cervantes is a registered financial planner of RFP Philippines. He is the author of the best-selling books Financial Planning for the Fast-changing World and The Seed Money. To learn more about personal financial planning, attend the “Financial Planning for the Fast Changing World.” Reserve your Slot on This link: https://cardinalbuoy.com/seminars/