Even if you haven’t been keeping up with the news on a daily basis, it is almost certain you are aware of the tumultuous time our world has entered. With the recently contested presidential election, the evolving threat of COVID-19, and the continuation of deficit spending, financial markets have entered an uncertain age.
Leading up to the last election, both candidates portrayed the economy in starkly different terms. President Trump declared the economy to be one of the greatest on record, while his Democratic opponent Joe Biden described the economy as being stuck in a “deep hole.” Both perspectives tell a portion of the truth, yet which is closer to reality?
There are many questions investors face as they attempt to navigate the uncertain waters of the financial future. Fortunately, Total Resource Financial is here to help guide you in the right direction for your future and offer better financial planning strategies. Here are a few things to take into account when planning your financial future in these uncertain times:
Be Wary of Short-Term Movements
Remember that short-term movements in the financial markets are often unpredictable and don’t abide by any averages. At any point, there could be a 10% reduction in the equity markets. Total Resource Financial isn’t motivated by emotions, as our approach is a comprehensive analysis of market events to determine their meaning and impact.
Focus on Long-Term Equities
Equity markets have proven a reliable source of positive returns for investors when earmarked for at least five years. When an investor allocates resources that are needed in the short term in equities, they risk putting themselves in a position of selling during a bear market and facing significant losses. If these resources would be needed in the short-term, some may advise against going into equity markets.
To expand on this, many investors choose only to hold stock they are comfortable keeping in the long-term. More often than not, the most challenging way to increase wealth is through speculation and short-term gains. Quick returns have often found investors selling at a significant loss — or worse, stuck withholding a lousy position in a protracted downturn.
Mitigating Risk Through Asset Allocation
When determining which investments would be best for you, most suggest not to put money you will need in the short-term in the equities market, and instead consider investing in equities to earn a reasonable return in the long-term. If someone younger has more time to build wealth, they may want to take additional risks with their investments to garner a larger return.
When compiling your portfolio, it is critical to personalize your investments to your unique circumstances. Through proper asset allocation, you can minimize risks to your long-term goals.
Diversification
No matter the condition of the market, it is always essential to maintain a diversified portfolio. By holding various assets, an investor can concentrate on earning the highest returns while reducing risk. Diversification is the ideal way to keep a healthy portfolio while taking into account possible downturns in the economy. Your portfolio should have diversified investments you are comfortable with and reflect your goals.
Find a Professional to Help
We understand that not everyone has time to sit down and develop an investment portfolio that can build your wealth while not taking too many risks. If you intend to invest in the market, it would be wise to consult with a professional. At Total Resource Financial, our goal is to understand your needs and cater to an investment strategy that best fits them. Whether you are a seasoned investor looking for inheritance tax planning, or a new investor just beginning your portfolio, Total Resource Financial will listen. For more information about our services, please contact us today.