How to stabilize your portfolio in a destabilized world

My dear Friends,

At the moment, the list of problems seems to be endless: recession, inflation, a war, and soaring energy prices.

The news is really not encouraging. To be honest, I have a strong sense of overwhelm and making the right decision seems to be almost impossible.

Let‘s be honest; we all have similar questions at times like this. Will I be able to maintain my standard of living? What about my financial goals? Do I have to change my plans for the future? Will I lose money?

Fair enough, we have different ways of dealing with bad news, but we are in the same boat where our portfolio is concerned. No matter how big or small the portfolio is, we need to stabilize it in destabilized times.

Uncertainty is set to remain high in the months ahead, and the fact that it is nearly impossible to time the market doesn`t make things easier.

But there is always light at the end of the tunnel, and there are things you can do to secure our assets.

Investor‘s Anxiety

Don’t let emotions rule your decisions. I know it is easier said than done unless you are a robot. We are all allowed to be unnerved by this current crisis.

But here are two very important messages: Don’t let your emotions rule your decisions, and don’t do it alone!

Remember also actionism is the opposite of making informed decisions; it is dangerous. So here are some tips:

  • Stay level-headed, don’t be driven by panic and fear
  • Stay informed and look at the bigger picture
  • Bear in mind that investing is longterm
  • Reassure yourself by looking toward the future– conflicts end, a crisis does not last forever
  • Over the last 50 years, markets have seen wars, several financial crises, terror attacks, market crashes and plenty of other turmoil- still, the markets returned an average of 10% a year.
  • Do not anticipate or forecast you are no fortune teller – make informed decisions.
  • Discuss your opinion before you make the decision. Talk to other female investors, and join a community. Talk to your wealth manager and talk to your partner. This will prevent you from making critical errors.
  • Don’t defer decision-making to others, participate. Because it is your money and most importantly your point of view is valid and important!
  • Remind yourself that “in states of extreme emotion, our cognitive power is reduced by 13%,” says Dr Daniel Crosby, an expert in behavioural finance. 
  • Durability bias: Don’t project bad things into the future. Like good things, all bad things come to an end. The world will change, but disruptions never persist to the extent people think they will.
  • Don’t allow greed or fear to shake you from your long-term goal. Adjust your strategy if necessary.

Investing, is rooted in optimism, an approach that has stood investors in good stead over the years. Humanity is also durable and has tackled great challenges before and will likely defeat this one as well.

Templeton Maxime

Self-care First

Yes, we are in unchartered waters, and yes, you should absolutely do something and make informed decisions and necessary changes, but it isn’t all just about investment decisions. You will be so much better if you:

  • Have fun and enjoy yourself
  • Be involved in meaningful work
  • Have a higher purpose – work towards something bigger than yourself. Teach something, help others, start a charity or a community.
  • Build and maintain strong relationships with friends, join a group of like-minded women and maintain a strong relationship with your family
  • Always strive to be better today than you were yesterday

” the world is united in a common goal in a common fight and I would never ever bet against humanity”

Dr.Daniel Crosby, Expert Behavioral finance

The Stabilized Portfolio

I know it sounds easier said than done, especially as everybody around us seems to panic, but STAY CALM!

We all want our assets to be fruitful and multiply; however, preserving capital is key to successful long-term investing. Try to remind yourself of the general investment principles and your main objectives.

Above all, DO NOT PANIC SELL!

With uncertainty set to remain high in the months ahead, build a portfolio that can prove resilient across a range of potential scenarios.

  • Lean more toward the defensive areas of each asset class. For example, healthcare, transformational energy stocks, or high-quality bonds.
  • Make your investments in different currencies. Swiss francs and US Dollars are traditional safe havens. For various reasons, including further sharp interest hikes by the US FED, many other currencies will stay weak for some time to come.
  • Diversify geographically and in terms of assets. Most geopolitical crises or economic downturns will impact some nations more than others.
  • Look into private markets. Public markets are not the only route to strong returns and portfolio strategies. Private markets have a low correlation to public markets, offering diversification benefits.
  • Combine diversification with technical analysis. Healthy investing begins with identifying healthy companies with a proven track record and a promising future.
  • Think long-term. During periods of high volatility, it is difficult to look past the day’s issues. But look beyond the latest news, and invest in industries that will benefit from long-term growth trends. Like the environment, alternative energy, food, or cybersecurity
  • Consider hedges– government bonds or gold are considered appealing save-heaven assets when markets take a downturn. But not every crisis is the same as much as there are many other options for hedging. Commodities and energy, in general, seem to be a good bet for the current crisis.
  • Never follow the crowd.

Buzz-Stopp

Uncertainty is an inescapable part of life, and you will not discover ways to do away with it; you will only find ways to deal with it.

View such a volatile time as a chance to evaluate your portfolio’s resilience and potential for long-term returns.

Stay level-headed and informed this gives you the confidence and clarity you need in such destabilised times. Look at the bigger picture and disregard the daily onslaught of panic-mongering headlines.

IMPORTANT: don’t make any decisions on your own. Get advice, make your voice heard and discuss your ideas and fears with others.

Before you make any decisions, join the tribe

@Invest! ELLE

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