A strong portfolio is a diverse portfolio. If you’re going to get ahead of the crowd in today’s economy, you need an investment portfolio that can handle the shocks and surprises that the world is coming to expect.
Since the 2008 recession, investor confidence in the global financial system has remained low. Stock markets have been bullish for years, but many have their doubts about the strength of the economies underpinning that growth. Many believe that bad auto loans in the US could trigger another debt crisis, while growing household debt, stagnant wages, and increasing worker precarity could prove to be even bigger issues across Western economies that haven’t yet seen a recession in the new economy.
Diversification means allocating assets in a way that decreases exposure to risk, protecting your money from uncertainty. But is that all diversification should do? With the right moves, you can adapt your investments to grow during times of crisis. It just might mean taking a more active interest in your money, and thinking hard about your goals. What can you do to protect and grow your finances even in the midst of a crisis?
1) Invest in Gold
Gold prices correlate negatively to share prices; when share prices go into a tailspin, investors move their money into gold as a safe haven. The pressure pushes gold up, and if you want to enjoy the benefits, you need to own gold ahead of the crowd. Gold is very much influenced by the perceptions and sentiments of investors.
Generally speaking, gold is not going to be the money-maker in your portfolio, but once it does move into that position, the benefits can be huge. Gold bull markets tend to happen when inflation is out of control or stock markets are too volatile to make money.
You can buy your gold from a proper online dealer conveniently and securely.
2) Buy Shares After Crashes
Gold’s negative correlation to shares should be your secret weapon to wealth building. As share prices fall and gold prices rise, their proportion in your portfolio will become imbalanced. Rebalancing after a crash will put you in a position not many other investors will get to enjoy; capitalized to buy shares at low prices.
While other investors, still nervous about the volatility that follows market crashes (it can take years for markets to recover), you will now have excess gold that others will be eager to buy at higher prices. You can use that cash injection to snap up shares at low prices and enjoy better returns from the recovery that follows.
3) Use Dollar Cost Averaging
Sometimes you wind up with a windfall, such as a holiday bonus or a tax return. It can be tempting to invest all at once, but there is always a risk associated with timing your investments. Prices could fall six months from now, or they could be higher in a matter of weeks.
Dollar cost averaging means investing a fixed amount of a particular investment on a set schedule. This spreads the risks of timing your investments.
With these strategies in hand, you should have no trouble diversifying the smart way.