Achieving financial wellness requires careful planning and disciplined money management. I speak from experience, as I didn’t always prioritize investing, saving, or diversifying my financial portfolio. Over the years, we’ve seen the ups and downs of financial markets, and diligent investors have enjoyed significant returns from Wall Street since 2009/10. For the past six years, Wall Street has seen an upward trend, benefiting many financial portfolios.
However, I must admit that I was a bit late to the party. By the time I started investing, tech giants like Facebook, Google, Twitter, Tesla, and Microsoft had already taken off. Still, I believe the growth trend will continue, and my portfolio will improve over time. I’ve learned that the smartest financial portfolios are those that reduce market risks over time. In simple terms, dollar-cost averaging is the best way to invest in financial markets.
DON’T FEAR INVESTING
Instead of investing a large sum every few months into mutual funds, single stocks, ETFs, or 401(k) investments, break it down and invest smaller amounts monthly. This gives you a more even spread when buying equities. For example, as of June 1st, 2017, Apple Inc. (AAPL) increased by 39% for the year, Facebook by 33.52%, and Google by 26.40%. If I had invested in Google three years ago, my returns would be 77.08%, Facebook returns 137.98%, and Apple’s returns 70.08%. These significant growths can greatly boost your portfolio, especially if you start investing early in your career.
You might wonder what I did with my money all that time; I kept it in zero-interest-bearing bank accounts. Shockingly, I was even charged for keeping my money there. A common reason many hesitate to invest in financial markets is the fear of market volatility. They worry a market crash might wipe out their savings. While this is possible, consider the financial crisis that erased trillions of dollars from Chinese stock markets when the Shanghai and Shenzhen indexes crashed in 2015/2016. China’s GDP fell from over 7% to 6.7%, but their stock markets have since rebounded, and China now boasts the world’s second-largest economy. This shows the resilience of financial markets. Remember, markets rise and fall, and even in a downturn, there are profitable investment opportunities, which are far better than keeping money in a bank account.
SHIELD YOUR INVESTMENTS WITH A DIVERSIFIED PORTFOLIO
Hedging is a great way to protect your investments during downturns in certain market sectors. For example, gold is considered a safe haven when equities are weak. During geopolitical uncertainty, investors often pull out of equities and invest in gold. The same goes for the Japanese Yen, oil, and Treasuries.
A tip from a top options trading broker was to spread investments evenly across domestic and foreign stocks, bonds, mutual funds, ETFs, and currencies. You might also consider diversifying further with contrarian trading options, including CFDs and other derivatives. However, be patient with your investments, as immediate returns are not always guaranteed.
THINGS TO CONSIDER BEFORE INVESTING
Unless you’re getting into futures markets, which involve leverage, margin, and high risk, you’ll need patience to wait for your assets to grow over time. Having cash in the bank can buffer against stock market volatility but won’t do well during hyperinflation and low-interest rates. Thus, a balanced portfolio is the best strategy for retirement planning. Remember the golden rule: Don’t put all your eggs in one basket. A thoughtful mix of asset classes like indices, currencies, commodities, treasuries, and stocks is the safest strategy today.