This is How You Create a Portfolio That Can Survive Anything
After years of continuous crises and extremely volatile markets ranging from COVID-19, rampant inflation and fuel prices to the Russian invasion of Ukraine it has become apparent that everyone has to be more careful when investing.
Author:James PierceReviewer:Alberto ThompsonApr 27, 20222.2K Shares277.7K Views
After years of continuous crises and extremely volatile markets ranging from COVID-19, rampant inflation and fuel prices to the Russian invasion of Ukraine it has become apparent that everyone has to be more careful when investing. Not to forget the endless fighting in Ethiopia and South Sudan, a full-blown genocide in Myanmar, and the economic currency collapse in Lebanon; we really don’t now what the next event that’s going to affect us all is coming from.
Lately, we’ve all learned that no market is safe when a crisis hits. The stock market has had a turbulent year, commodity prices are running wild, and currencies are collapsing overnight. Even bitcoin and the cryptocurrency market doesn’t seem to be a safe-have when global economic markets are running berserk and now we can expect interest rate hikes that can send the housing market plummeting.
So how do one protect him or herself against this? Based on the past couple of years, these are our three hottest tips on how to create a waterproof portfolio that can withstand anything.
Combine Investing With Derivatives Trading
Lastly, we want to take up the cudgels for derivatives trading and scalping, ie. trading Contract for Difference (CFDs), spread betting, etc. This is in one way a great way to diversify your efforts and by short trading your investments you can counteract investments that are at the risk of turning unprofitable.
Naturally, it takes time and effort to learn how to trade, but in the long run, it can serve you very well. And, as mentioned, there is currently a greater need to monitor your investments and associated markets, which will make it a lot easier to find trading opportunities.
If you’re new to trading, we suggest that you start by learning the basics, preferably by using a broker with a risk-free demo account. You can find all the top online brokers here: https://tradingguide.co.uk/awards/trading-platforms/
Diversify Like A Pro (As Much As Possible)
Diversification is, as always, your most effective tool to protect you from volatile markets. But we would argue that this is even more important now than ever, and it has to be done even more immaculately.
In the past, diversification has been quite easy and a “5-6 different markets, and 10-25 different assets” strategy has been more than sufficient. Today, however, we suggest that you diversify even more since we now know that the crisis and collapses can happen overnight even in the Western World.
The point is that you should spread your funds wide and far so that an invasion in Europe with subsequent economic sanctions doesn’t affect more than 5% to 10% of your portfolio. Or that low interest rates is what makes or breaks your real estate investments, that collapsing currencies in the Middle East isn’t turning your investments into personal financial risks, or that your commodity investments go from total collapse to a lucrative investment in a few weeks (let us not forget that US oil dropped below $0 per barrelin April 2020).
Therefore, your goal should be to diversify as much as possible by having a portfolio consisting of at least 10 different markets and even more sub-markets, for example, stocks in Asia, Europe, and the US as well as in different industries. You should also consider new markets such as cryptocurrencies, but don’t invest too much here either.
So instead of using the “5-6 markets, 10-25 assets” strategy, we highly recommend a “15-20 markets, 30-50 different assets” strategy. And as always, you need to be very careful with how, where, and why you buy certain assets.
Constantly Monitor Portfolio And Market News
In the wake of all the ongoing global events and their effect on the financial markets, the need to monitor investments has become increasingly more important. You really have to see your portfolio as a part-time job these days, and you need to actively analyze major news from all over the world. And not only financial news and policy changes, but all news ranging from war reporting to virus and pandemic coverage.
If you don’t have the time or energy needed to do this, we suggest that you hire an investment managerto do the work for you. Considering how volatile some markets have been – and still are – paying an investment manager could be one of the best investments you’ll make.
James Pierce
Author
James Pierce, a Finance and Crypto expert, brings over 15 years of experience to his writing. With a Master's degree in Finance from Harvard University, James's insightful articles and research papers have earned him recognition in the industry.
His expertise spans financial markets and digital currencies, making him a trusted source for analysis and commentary. James seamlessly integrates his passion for travel into his work, providing readers with a unique perspective on global finance and the digital economy.
Outside of writing, James enjoys photography, hiking, and exploring local cuisines during his travels.
Alberto Thompson
Reviewer
Alberto Thompson is an acclaimed journalist, sports enthusiast, and economics aficionado renowned for his expertise and trustworthiness. Holding a Bachelor's degree in Journalism and Economics from Columbia University, Alberto brings over 15 years of media experience to his work, delivering insights that are both deep and accurate.
Outside of his professional pursuits, Alberto enjoys exploring the outdoors, indulging in sports, and immersing himself in literature. His dedication to providing informed perspectives and fostering meaningful discourse underscores his passion for journalism, sports, and economics. Alberto Thompson continues to make a significant impact in these fields, leaving an indelible mark through his commitment and expertise.
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