Investing is not always comfortable for many people. It is however important to remember that, without risk, there are no returns. With the potential impact of the pandemic on economies and the global market, the world has been thrown into a recession and has resulted into stock markets crashing with equity markets falling by over 30%. Knowing how to deal with your investments is important as the pandemic is far from over.
In as much as the coronavirus outbreak is alarming, we have lived through hard and trying times before including: SARS in 2002-2003, avian flu 2006, swine flu 2009, Ebola 2014, and Zika 2016 among several others with each of these outbreaks triggering severe market shocks that lasted for months or even years. The only thing that should matter to you as an investor is how to react to any market situation. With several reasons, pointing to the economy and markets recovering a recession is definitely eminent, however it may be short lived.
The duration of the recession depends on the severity of the pandemic and with the government and the central banks coming out to provide aid and liquidity to keep businesses afloat the long term consequences may be dire to the economy. In the event that the economy bounces back business owners will have a sense of urgency to recover lost revenue, the liquidity provided by the central banks will have to end up somewhere and may result into inflation that will be realized in asset prices.
During this pandemic, it is important to diversify your investments. Proper diversification is the most effective way to reduce volatility. If you want to diversify your investments properly, you first need to understand that different assets have different ranges and patterns of volatility. Diversification will enable you to capture returns in your portfolio wherever and whenever they occur. As with any recession, some assets are likely to outperform during this pandemic. As witnessed in other recessions, hedge funds, bond and gold almost outperformed risky assets- information obtained from thetradeable.com.
Regardless of whether you are young or nearing retirement, you should not panic. As history as shown repeatedly there is always time for the market to recover and advance. Even within five years of retirement, you need not to panic all you need to do is to keep tabs on your benchmarks each year to determine if you are still on track. Always look at your plan to find out areas that need adjustments.
To conclude, always remember that it is important to stay invested and always work closely with experienced financial advisors to help you in choosing the right strategy. Diversifying your assets, staying focused and calm are just but the essential you need when making any investments but working closely with experienced financial advisors may give you a boost into the right direction.
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Author : Ruben Arco |
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