How to Invest in Times of Uncertainty

With a global pandemic and Brexit arriving at almost the same time, investing has become a pretty uncertain process.

Whether you have been trading for a while or are just learning how online trading works, it is vital that you consider how to invest when things are so up in the air and all over the place. Believe it or not, you can still safeguard your investments and secure them during this time by following these simple tips.

1. Diversification

No matter what the situation is, diversifying your stocks across various asset classes is one of the most sensible strategies you can adopt. Every industry will have a different reaction to the unique set of circumstances in which we find ourselves and as it is hard to predict precisely how this will go combining your assets and ensuring you spread them across property, bonds, commodities and shares whether you hold these through a fund or directly gives you more protection and less chance of everything bottoming out at the same time. It also makes a lot of sense to ensure that you are investing in companies of different sizes as well; the theory that the larger companies are more secure does not always hold water. As well as this, you want to be looking at the geographical location and once more spreading them across on a global scale if possible as crises in one area will not necessarily affect the other.

2. Phone a Friend

Or in this case, ask a professional. It is easy to try and go it alone, but this means you are making mistakes that have already been made and basically trying to reinvent the wheel when there is no need to do so. As it is so uncertain, it is much better to take advice from professional financial advisers because they understand and work in the market all the time. They also operate in a purely calculated way and do not have any emotional ties to the investments. This makes it much easier for them to decide when to hold on or sell. They are also best placed to help you see when it is time to change your strategy or rebalance your portfolio.

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3. Little and Often

Another strategy worth considering is to make frequent small investments rather than looking for a more considerable investment when the time is right. It could be a long time before the market conditions feel perfect and making a significant investment in this current climate is not sensible. There is also a stock market phenomenon they call pound cost averaging, which suggests that the same amount of money invested each month buys more units of investments when the market is lower and conversely fewer units when the market is higher which evens out any of the volatility involved in the current situation. Unless you really understand stock market trading, it is virtually impossible to try and predict the perfect market conditions. In turn, this means that mistakes are made more often than not, and poor investments are made. It is also pertinent to consider automating some of the investment processes as this prevents the element of human error.

4. Hunker Down

The other thing to consider is how you feel about the risk factors involved. Another strategy is to hunker down and do nothing at this current time and allow everything to remain at the status quo. It is possible that if you had an excellent balanced portfolio before it will return to normal eventually, but at this stage, it is impossible to say how long that might take. If you are prepared to wait your time, then you could just do nothing. Freeze everything and leave it as is. This means it’s important to determine your own risk assessment. You need to be comfortable with the level of risk involved in every investment you have as during the uncertain times this risk will intensify. If you are considering making a new investment, be sure to take into account this added risk before making any decisions. It does not make any financial sense to tie everything you have up into this area of investment, so ensure that you have a cash buffer ready during these volatile times. Liquidating assets is a risky business if the timing is wrong, so you don’t want to be in a position where you’ve entirely run out of money and have to be forced to liquidate in order to survive.

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5. Don’t Panic

The best thing you can do is panic and make rash decisions. While you may need to act reasonably quickly, it is vital to consider the entire risk and as mentioned before, take advice if necessary, before deciding on a course of action. There are other ways to protect your returns, and this may include safe havens which are considered things like government bonds and some high rated corporate bonds because these are prone to stability when compared to company shares. It is crucial to get the balance as the current climate can skew everything but again take your time before deciding. If you need to rebalance, do so calmly by simply selling off assets in any area where you are overloaded and picking up some new investments where you don’t have enough. This is another reason for ensuring that you have a reliable financial advisor working for you. Knee jerk reactions because something has suddenly lost value is not a sensible strategy as we tend to prefer to look at the long-term gains.