Using times of crisis to assess and adjust your investment portfolioHampton Wealth
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If you’re like many investors, you’re probably a little anxious about the situation in your investment portfolio. That’s understandable, of course, due to the Coronavirus outbreak that has unpredictably brought the global economy to a grinding halt.
The normal response to this is to find ways to diversify your portfolio, so you’re not completely vulnerable to the pandemic that has already taken hold.
It’s important to stay optimistic and look at this downtime as an opportunity to catch your breath, steadily review and adjust your investment decisions. By the time this all blows over, you’ll be more than prepared. Here are a few ways you can do that.
Spring clean your portfolio
Take this time to fine-tune your investment portfolio alongside a trusted professional to optimize results in the future. Look at your list. We tend to hang onto our underperforming stocks in the hopes of turning them around and proving doubters wrong.
This also extends to stocks that are performing well because they’ve been acquired but underperform according to our standards and to the market as a whole. This may be due to being over-optimistic and not grounded in something scientific or academic. By trimming the edges, you can obtain a more realistic, agile and organized approach to your trading.
While you’re at it, this might also be a good time to review your entire financial arsenal and start looking at where you can cut costs. Fees, charges and other forms of overheads might exist that are totally avoidable. It’s a good time to be lean and take on less expenditure.
Look to other parts of the world
No matter how deep the market seems to fall, some economies out there are running asusual. If you don’t invest outside your borders during this time, you’re probably missing out on quite a lot. In light of this, consider exploring markets, sectors and industries that expand beyond borders. You don’t necessarily have to go all-in on a potentially lucrative investment opportunity, but it does make sense to do your research. If there’s a good opening, you may want to consider positioning your investment approach in that direction and be ready to strike when the timing is right.
Assess your portfolio’s risk levels
When it comes to your finances seek professional advice, we all know there may be some level of risk at any given point in time. An advisor assists the idea of responsible investing to control and manage the amount of risk and reduce potential damage to your portfolio.
However, it is important to consider the significant amount of risk inherent in the market at these times, and the probability of more major drops in market prices (black swans), as well as the probability of a drawn-out recovery. It is difficult to estimate exactly at which point the economy will bottom-out, and it is also impossible to predict how long the recovery time will take. Ultimately, to take advantage of low market rates, it is the risk potential that will decide whether an investor can escape the recession.Consider that benefits may outweigh the risks and also take a look at current components to see if there are any weaknesses that could expose you to unnecessary loss.
Look more into alternative investments
Institutional and high net worth investors have placed more of their money into real assets in recent years, often referred to as alternative investments. A distinguishing characteristic of real assets is that they are ‘hard’ or ‘tangible’ forms of assets that allow ownership of stored value.
Under inflationary conditions, they continue to retain value, and can also act as a diversifier within a growth portfolio. Natural resources, infrastructure, and real estate are the three main financial asset groups comprising alternative investments.
These options are great ways to diversify your holdings beyond traditional investment vehicles and safeguard your portfolio with reinforced strength.
If you aren’t in trouble, do nothing to adjust your investment portfolio
Take a look at the current condition of your financial arsenal. Are your assets, investments and overall portfolio in danger? Contact your advisor and review your status and look for long term projections. If there’s no imminent danger, then it might be a good idea to wait things out.
When an investor decides not to do anything,paper losses are not translated into realized losses. If an investor owns a reasonably diversified portfolio, the storm can be weathered without selling out and recession can be avoided. But the wait for recovery could be a long wait.
Can you afford to do nothing? Why not get in touch and get and see what others are doing. You might be surprised.
Hampton Wealth offers entities access to high-quality investment options such as listed bonds, bonded whisky investments and funds with a focus on providing better than off the shelf financial returns.
Find out more at HamptonWealth.com