The market is unpredictable, and this makes the job of a portfolio manager very difficult at times. When markets are volatile, managers have to use risk management strategies in order to protect their portfolios from substantial losses. Otherwise, they could be asked to re-allocate funds and sell investments at unfavorable prices just because there was a temporary downturn in the market. This course of action is even more painful if you know that the market will eventually correct itself.
In this article, we’ll discuss 4 ways that you can protect your portfolio and stay profitable during these uncertain times.
Seek Professional Guidance
You may or may not have done lots of research on the subject, or have been investing for several years. No matter what, knowledge is power and helpful advice can literally be gold. If you have a significant amount of money invested, it is important to seek professional advice from a financial adviser.
They will be able to help you diversify your investments into more stable assets that can stand up against the volatility caused by market movements. They will also be able to provide some guidance on how much risk is appropriate for someone in your position. This would include them making an assessment of your personal attitude to risk. You may prefer low-risk investments with small returns or high-risk investments that could potentially gain more.
Most financial advisors have a presence on specialist websites on the internet. When one suggests using options to hedge you can find out about portfolio hedging, and strategies such as buying puts, selling a covered call, or building collars. The right financial partner can help you set up, navigate and protect your portfolio with the future in mind.
Watch The Markets
Keep an eye on your portfolio’s value and rebalance it periodically. Look at the fundamentals – economic data, company earnings reports, etc., but don’t make investment decisions based solely on macroeconomic factors like GDP growth rates and unemployment numbers. This is because those factors are often too far removed from a company’s operations. You should aim to sell stocks before they drop and buy them as soon as their prices start going up again, and watching the markets could help make this happen.
Newspaper newsletters are an online investment strategy worth looking into. They often allow subscribers access for free or at least have very affordable plans. Reading through these newsletters will give better insight into what’s happening in the online world, which may help lead to some more lucrative investments down the line.
Invest In Different Things
Investing in diversified assets is one of the best ways to prepare for market turbulence because it helps spread the risk. By diversifying across various asset classes (stocks, bonds, commodities, etc.), investors will benefit from owning assets whose fortunes rise and fall independently of each other. Don’t put all your eggs into one basket, otherwise, your investments will stand or fall in one go.
It’s also worth investing in different industries, such as technology and energy. For instance, if oil stocks fell to their lowest in a decade, there could be an explosion of new companies that are revolutionizing different aspects of the business through technology. In addition, different geographical regions can offer different opportunities—for example, Europe may be struggling with debt issues while Asia sees its economy grow by leaps and bounds.
Don’t Panic Sell
Be patient when investing – it’s important not to react too quickly in a volatile market environment. Don’t make rash decisions about how much money should be allocated into stocks versus bonds or other types of investments. This could lead to big losses over time due to missed opportunities. Don’t panic sell when the market is down – wait for it to rebound before selling off your shares. Stay invested during market corrections and downturns, even if you’re tempted to sell off stocks or other investments that have fallen in value.
Having said this, you should also consider what would happen if you lost all of your investments. Do you have a plan in place for this scenario, such as a savings account or emergency fund? Even if you think you’re doing well with your finances, you should always make sure you keep a cash reserve for emergencies.
Investment is often about the long haul rather than a quick gain. During this time you should watch the market, stay in regular contact with your financial advisor, spread your investments and not respond in panic. In turn, you may be able to protect your portfolio and achieve lasting profits.