How to Protect Your Long-term Investments From Uncertainties and a Volatile Stock Market
Are you wary of the continuous declining performance in the stock market? Do you see your favorite companies’ shares decreasing as the days go by? Before you actually go to panic selling, the financial experts advise you to take a deep, calming breath.
The financial experts don’t want you to commit a financial mistake which would lead you to miss out on the opportunity to grow your money to its maximum potential. They give some tips on how to manage your long-term investments, despite the ups and downs in the stock market.
Diversify Your Investments.
Despite knowing big, giant companies like Facebook, Apple, and Amazon, the truth is, you’re still uncertain whether or not these companies will survive for the next 10 or 20 years. So it’s important to spread your money and invest it in different types of investments rather than putting all of them in one company.
The purpose of this is to minimize your risks and losses in case one company declares bankruptcy or if they’re not performing as well as expected.
You can also diversify your types of investments like investing in stocks while having a mutual fund that invests in bonds. If you still have extra money left in your pocket, you can even invest in the international market. While you may still have some losses, it can help prevent your money from losing completely, thus, mitigating the stock market’s volatility.
Invest according to Your Time Frame
Most financial experts encourage you to invest while you’re still young. Why? It’s because you have the most potential to grow your money over time and invest it in the volatile stock market. Since you still don’t have major goals and priorities in life, there’s nothing to hold you back from investing your money.
But if you’re already mid-30s and you’re starting to build a family, or you’re in the 40s and you need to fund your children’s education, then the financial experts advise you to invest in bonds for security and less volatility.
You may get lesser potential returns but at least it’s less risky and you can secure the money to support your family or fund your children’s education. As you move closer to your retirement, you can invest in short-term investments so that you can access and use your money immediately.
Rebalance Your Portfolio
Aside from considering your time frame, you also have to consider your risk tolerance. Are you hungry for higher potential but don’t mind risking a lot of your money? Then you can invest a majority of your money in stocks.
If you’re conservative, it might be better to have a balanced portfolio. The financial experts recommend you review your portfolio at least every year to see if one of your investment performs better compared to others, or if you’ve met your financial goals. If not, then you can rebalance your portfolio with your advisor’s guidance.
It’s also important that you allow a fixed amount of money to save or invest on a regular basis to practice the art of saving. If you haven’t already, the financial experts recommend you avail of a 401(k) or 457 plan and have your contributions automatically deducted before you receive your salary. Not only are yoy saving on a regular basis, but you can also buy more shares when the share’s prices go low.
Shift Your Financial Strategy as You Approach Retirement
As you approach the retirement age, most financial experts will recommend you to shift your money to more conservative and short-term investments like bonds to protect your money against market volatility.
One way of doing that is through investing your savings in money-market funds. But if you’re still healthy and capable, you might also want to hold on to your investments a little longer and invest it in the stock market for higher potential returns. The final decision still lies in you.
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