Wealth protection in uncertain times
Posted on May 29 2019
Life can be unpredictable and when it comes to managing finances, instability can have a devastating impact.
The good news is that, by being strategic about planning for wealth protection in uncertain times, you can help safeguard yourself against financial insecurity - and prosper.
In the beginning, the first sensible steps towards protecting your wealth should involve some fresh diversification and rebalancing of your portfolio.
Changing the way you invest and attempt to grow your money is not an overnight thing. It’s important to be sure you have accessible cash at your fingertips during the transition phase, as your new-look investments lay solid foundations and start to work positively for you.
Seeking professional advice is always recommended - especially when you have a sustainable wealth protection vision in mind. Having a basic understanding of how the market works is a good thing but that old saying about a little knowledge being a dangerous thing is worth remembering too. Markets do fluctuate - even in good times - and any investor whose nerves get the better of them and motivate them to make split-second decisions based on fear and uncertainty are rarely going to make any serious financial gains in the long-term.
The start of the 2018 financial year, on a global scale, was marred by significant upheaval and uncertainty that included the ongoing Brexit saga, as well as growing trade tensions between China and the US. Fears of the economy putting the brakes on are well-founded and will continue to be an issue - factors that will see economic growth in the next year ahead remain uncertain.
Inflation that exceeds returns on savings account interest rates and the worry about hanging on to bonds, shares and assets that might take a dive in what is clearly an unstable climate are all legitimate reasons to feel nervous about the direction of your own wealth protection.
To help you feel in control of your financial future, try these practical tips to help your investments remain as protected as possible while we all ride out the storm:
Diversify your investments
Different industries are impacted by different events and the flow-on negative news has on the stock market is just as varied. An economic crash in one sector, can lead to a boom in another industry. By diversifying in different types of industries, your finances are better protected. When you spread your investments over a combination of assets that may include property, bonds, shares and commodities, you have access to potential for both short-term and long-term financial growth and do not have all your eggs in one basket. It’s important to realise that diversification does not mean you are guaranteed complete protection from financial losses, but it is a strategy that can definitely minimise your risks.
Diversification also means mixing up your investments within each asset class. A portfolio that has a good balance of shares in both small and big business, as well as businesses in different geographical territories is another smart way to reduce risks.
Acknowledge when you need professional advice
Sure, you might have managed your share portfolio well yourself, to date but do you really have the insights required to weather a volatile financial future?
Honing a robust investment portfolio requires experience and professional knowledge and, even if you only utilise a professional adviser to help you set things up, it can be an important investment for your healthy financial future.
Advisers aren’t just relying on their own understanding. Most quality financial advisers have access to a team of support people who help them monitor market fluctuations on a daily basis and help them make informed decisions about when to invest more - or when to get out.
Taking risks with your investments might seem fun but one of the benefits of working with professional financial advisers is that they help you understand the ramifications of your appetite for risk - and how to keep it satisfied without losing all your money on impulsive decisions.
Taking risks is less frightening in a healthy market. When there is uncertainty about a global economic future, fluctuations in the market can have a bigger impact and risk needs to be viewed through a very different lens.
Cash creates a buffer
Any wealth protection strategy needs to incorporate a cash-on-hand buffer to help you ride out the inevitable tough times. Liquidating assets when times get tough is never a positive thing, so to minimise the impact investment losses may have on your day-to-day life, keeping cash close by for emergency situations is a critical way to protect your secure financial future and prevent you from making impulsive decisions that might see your losses become even worse.
Investing money is always a roller-coaster. By being prepared for the downturns, you can enjoy the good times even more.