How Can Investors Protect Their Portfolio In Times Of Uncertainty?

Published On: July 18, 2022Categories: Latest News1.9 min read

No one likes to see their portfolio take a hit during times of uncertainty. So how can an investor protect their portfolio during these times?

Experts online  would say the best way to protect your investments is simple: Diversification. This means spreading your investments out across different types of assets so that if one or two perform poorly, you still have other investments that are doing well and balancing out your losses.

For example, you might invest in stocks and bonds, to balance out volatility during times of economic turmoil. This would help guard against  you being exposed to any one type of financial asset class and minimize loses.

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Other people might also invest in real estate rather than solely stocks and shares . The main reason to do this is that real estate tends to be less volatile than stocks and bonds. This is especially the case in areas where there is a good supply of houses, and the value tends to be more stable over time..

While diversification and low-risk investments will generally help protect your portfolio, they won’t prevent all damage from a crisis. In fact, according to the Forum for International Investment, it’s likely you’ll lose nearly half of an investment’s portfolio value if it’s regions real estate market takes a hit during a crisis.

To be on the safe side, you should consider having a “safety net” in cash that can be accessed quickly. You could have this set up as an RRSP (Registered Retirement Savings Plan), so if you lose money in your investments, you still have access to cash. Or you could do this with a TFSA (Tax-Free Savings Account), where the income earned from your investments will not be taxed until it is withdrawn.

Also, consider taking action before an emergency situation occurs. For example, some investors might be able to take out insurance on certain assets that could guard against losses.

Also consider factors like whether the asset you’re investing into offers you a high dividend yield or a stable return on your money. Again this could help stabilise your portfolio.

Some investors might decide on an investment that provide lower returns but are a good hedge against market crashes and downturns.

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About the Author: Jonathan Adams

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