How To Safeguard Your Portfolio From The Next Market CrashJune 16 | Posted by Matthew Clark | Top Story
Here we go again! Markets took a massive hit today primarily due to the growing protests in Greece. Although this is only 1 of many protests that have occurred in recent months, this one was entirely too close to home. The United States economy is fragile enough without the distractions of collapsing European countries, and if the situation in Greece continues to worsen, we may start to feel the ripple affects sooner than we anticipated.
The United States economy is hanging on a “shoe string” right now, meaning even the slightest hiccup could send the markets plummeting to 2008 lows. After all, the stock market has NO business even being where it is today and the ONLY reason the Dow broke 12,000 in the first place was because of QE1 and QE2. And guess what? QE3 is not really looking too likely now folks. There hasn’t really been too much talk of QE3 and the Fed has no idea if they’re even going to consider pumping more money into the economy. Inflation is already out of control, the US Dollar is on the brinks of becoming tissue paper, and everyone knows that printing more money is only going to make matters worse.
It may be time to face the harsh reality that the US economy is (excuse my french…) SCREWED! But there are ways to safeguard your portfolio in order to hedge against the total destruction of the US markets and if you haven’t already actioned a few of the below mentioned, then I highly consider doing so immediately.
- For those of you who are near retirement or literally can’t afford to see your portfolio take a nosedive, get out of stocks NOW. If your financial adviser or someone else manages your portfolio then speak to them about this. Explain to that person that you do not want to take too much risk right now and that you would rather switch to a much more cautious or balanced portfolio. Mutual funds, Bonds and ETF’s may be more suitable for your risk level.
- Speaking of balancing your portfolio, make sure you are diversified. Have you hedged against the falling US dollar by investing in precious metals? Are you invested in mutual funds denominated in other currencies such as British Pounds or Euros? Even though you might have a health mix of Equities, Bonds, and Funds, if the entire portfolio is denominated in US dollars, you’re in trouble. If the dollar falls so does your portfolio, especially if you’re subject to currency risk in the first place.
- Don’t panic! A loss is only a loss when you sell. If you have 10-15 good healthy investment years ahead of you, don’t freak out and start selling everything you own. Relax! The markets will rebound as they ALWAYS do. The media loves to play it up and make the world appear as it’s coming to an end. After all, that’s their job, but history has proven time and time again that the markets rebound and within 3,4,5 years they will soar once again to new highs.
- If Equities is your thing and you don’t mind high risk stocks, then consider Value Stocks versus Growth Stocks for the time being. Value stocks are healthy, stable long term blue chip companies that we all know will be around for decades to come. The only reason these stocks are taking a hit right now is because of the recent round of panic selling. There is nothing wrong with them fundamentally, and quite often, Value stocks don’t suffer as much as Growth stocks do during volatile economic conditions.
Moral of the story – No matter how bad it gets, and trust me it will get bad, stay calm, diversified and if you have time to ride it out don’t panic sell! If you have a financial adviser or stock broker, now is the time to communicate more than ever with that person and discuss your concerns with him or her. Your broker may have it all under control, but if you’re losing sleep at night over the recent correction, pick up the phone and make a move. Sitting around and hoping for the best is a very naive way of investing and will only lead to tears.
Tags: Bonds, Currency, Diversification, Dow Jones Industrial Average, Fed, Greece, Greece Protests, Inflation, Mutual Funds, Precious Metals, QE1, QE2, Quantitive Easing, United States, United States Economy