During times of market turmoil and financial crisis, it’s critical to protect your investment capital. Here are 5 essential tips to help safeguard your money:
Maintain a long-term perspective. Don’t panic and sell out of fear. Market declines are often temporary, even if they’re painful. Stay focused on your long-term financial goals. Historically, the stock market has always recovered losses and gone on to new highs.
Diversify your portfolio. Make sure your money is invested in a variety of asset classes, sectors, and geographic regions. That way you’re not overly exposed to any single investment. When some parts of the market struggle, other parts may hold up better. Diversification reduces risk.
Keep cash on hand. Having cash in a savings fund or money market account provides stability in your portfolio and a source of money to live on if you lose your job or income. It also gives you the flexibility to invest in stocks when the market is down and valuations become attractive.
Review your investment costs. When markets decline, the fees you pay on your investments matter even more. See if there are lower-cost alternatives to your current investment funds that provide similar market exposure. Lower fees mean more of your money stays invested working for you.
Rebalance periodically. Market declines can throw your investment allocations out of whack. Rebalancing involves selling some investments that have become overweighted in your portfolio and using the proceeds to buy others that are underweighted. Rebalancing helps ensure your money remains allocated according to your financial goals.
Staying disciplined during difficult times can be challenging, but following these tips will help you protect your capital through the ups and downs of the market. By maintaining a long-term perspective, diversifying, keeping cash on hand, minimizing costs, and rebalancing periodically, you can safeguard your money and come out stronger on the other side.
