Inflationary pressures and the Ukraine crisis have definitely caused a lot of volatility in the stock market. And it doesn’t seem that the stock market will cool down anytime soon. So, how are top investors safeguarding their wealth amid such unpredictability? Let’s take a look at five ways they are protecting their portfolios.
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1. Understanding economic trends and when to invest
Investment decisions need not be rushed. Smart investors are currently paying attention to economic trends and choosing where to invest carefully.
Many are currently leaning more towards safer investments, especially those that tend to retain their value even when there are high uncertainty levels. Gold has been on the rise, and on 8 March 2022, it came close to touching its all-time record high price of £1,574.37 set in August 2020. Bonds and other precious metals like silver and platinum have also seen price rises as demand increases.
There’s also evidence that many investors are shifting from growth to value investing. This is not to say that growth investing is bad. Remember, whichever investment style you choose depends on your individual financial goals and investing preferences.
2. Investing for the long term
Top investors highlight time as a crucial element to successful investments. This is mainly because trading in the short term can be challenging, even for professional investors.
Typically, the stock market can overplay in the short term, leading to quick, short-sighted and emotionally charged decisions. These can, in turn, lead to poor investments, meaning an increased risk of getting back less than you invest. After all, history has taught us that, in most instances, markets do remain resilient over the long term.
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3. Preparing an excellent investing portfolio
The secret is to diversify. The stock market is impacted by many factors, including but not limited to inflation, natural calamities, political turmoil, exchange rate fluctuations and current events. Some industries might be affected more than others, hence the need to invest in different sectors and incorporate different investing styles.
4. Saving
Clearly, the cost of living has been rising. And there’s even a strong likelihood it will continue rising in the coming months. Vulnerable families are already facing financial pressures, meaning having the money to invest might be challenging for some. Additionally, the chances of making poor investment decisions when you have limited capital can be high, especially if you’re trying to get quick returns on investments.
This is why smart investors always ensure they have a cash buffer or reserve at all times. And this could mean having multiple saving accounts for different purposes, such as:
- An easy access cash ISA to help you save tax free and have ready access to your funds when needed
- A lifetime ISA to help you save for a mortgage deposit or retirement
- A stocks and shares ISA that allows you to invest without incurring income tax on your dividends or even capital gains tax on your profits
5. Diversifying sources of income
Diversifying your sources of income is another way of ensuring you always have the money you need, especially during tough times. Side hustles can be a great way to increase your income, particularly if you choose a hustle with growth potential.
