An Economic Recession is Around the Corner, Here Are 2 Ways You Can Protect Your Wealth
No one had anticipated at the beginning of the year that 2020 would be so rough. From the Australian wildfires to the COVID-19 pandemic, the new decade has presented a set of unprecedented challenges that have brought the global economy to a screeching halt.
The coronavirus epidemic has definitely left everyone scared, not just about their physical health, but also their financial wellbeing. The signs of stress are already starting to show in the stock market as investors go into a buying frenzy, forcing the economy to the brink of a recession similar to the crash in 2008 which cost so many people their jobs, savings and even homes.
But a stock market crash should not be a reason to panic over your retirement fund, because historically speaking, the values always come back up sooner or later. However, there are certain steps you can take to protect yourself in a time of crisis and make sure that your investments are secure.
Don’t Change the Strategy
It’s understandable that you’d want to change your investment strategy once the market takes a downturn, but resist the temptation and stick to your original plan. There will be people who will try to sell off their stocks to invest in gold or currency instead, whereas others will try to buy more stocks while they are still valued at a low price, but financial advisors advise that you stay put in your investment strategy and don’t deviate from it.
Need More Cash?
One of the biggest characteristics of an economic recession is sudden inflation that can leave you struggling to cope with increased mortgage payments. Even though low interest rates might tempt you into taking out more loans, financial advisors suggest holding on to your cash and not putting it towards another downpayment or car loan. Even with an emergency fund and a stable career, it always gives a peace of mind to have some extra cash lying around to cover any unexpected expenses.
Times in recession can be quite unpredictable so one should always be prepared for the worst. Maintain a certain level of liquidity to make sure that you’re not dipping into your emergency fund or your investment portfolio when in need of some extra cash. There’s nothing worse than having to sell off some of your investment at a loss because you aren’t able to meet your living expenses.
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