So if you’re looking for a way to financially protect yourself while making the most of what you have There are several options to consider.
“If you’re not working or looking for a better position, you have a good opportunity to take advantage of a very strong job market to secure your position,” said Mari Adam, a Florida-based certified financial planner. Will be. ”
Invest in the housing boom
Mortgage: Fixed Now Fixed Rate
If you are about to buy or refinance your home, fix the lowest fixed interest rate available as soon as possible.
That said, “Don’t dive into big purchases that aren’t right for you just because interest rates may rise. Hurry up to buy expensive items that don’t fit, like homes and cars. In the future. Regardless of your interest rate, your budget is the recipe in question. ”
If you already have a floating rate home mortgage loan facility and you have used some of it for a home improvement project, ask the lender if you want to fix the interest rate on your outstanding balance and effectively create a fixed rate home. .. Greg McBride, Chief Financial Analyst at Bankrate.com, has proposed an equity loan.
If that is not possible, consider paying off that balance by taking out another lender and HELOC at a lower promotion rate, McBride said.
Cover short-term cash needs
It’s always a good idea to have liquid assets to cover you in an emergency or a serious market downturn.But it’s especially important when faced with big events beyond your control-including layoffs-it usually increases During the recession.
That is, cash, money market funds, or money market bond products with enough money to cover months of living expenses, emergencies, or high expected costs (eg downpayments and college tuition). It means to secure.
This is also recommended if you are nearby or retired. In that case, you may want to secure a year or more of living expenses that you would normally pay with a withdrawal from your portfolio, said Rob Williams, Managing Director of Charles Schwab’s Financial Planning, Retirement Income and Wealth Management. Said. This should be the amount needed to supplement the payment of bonds such as social security and private pensions.
In addition, Williams suggests that low-volatility investments such as short-term fixed income funds will take two to four years. It will help you overcome any market recession and give your investment time to recover.
Credit card: Minimize bites
If you have a balance on your credit card (usually with a high floating rate), consider transferring your balance to a zero rate balance transfer card that is fixed at zero rate for 12 to 21 months.
“It isolates you from rate hikes next year and a half, and it gives you a clear runway to fully pay off your debt,” he said. “Reducing debt and increasing savings can help us survive rising interest rates, which is especially valuable in the event of an economic downturn.”
If you don’t move to a zero-rate balance card, another option might be to get a relatively low fixed-rate personal loan.
In any case, the best advice is to make every effort to pay off your balance quickly.
Rebalance your portfolio as needed
When stocks are skyrocketing, it’s easy to say that you are highly tolerant of risk. However, over time, it must inevitably be able to withstand the volatility associated with investment.
So review your holdings to make sure they are consistent with the risk tolerance of potentially rocky roads in the future.
And while you’re doing that, if you find yourself overweight in any area after years of stock growth, rebalance your portfolio. For example, if growth stocks weigh too high, Adam proposes to redistribute some money to slow-growing, dividend-paying value stocks through investment trusts.
Also, make sure you have at least some exposure to bonds. Inflation has had the worst quarterly returns on high quality bonds in 40 years, but don’t count them.
“If the Fed’s aggressive rate hikes to curb inflation result in a recession, bonds are likely to work. The recession is far more than quality bonds than stocks,” Bennyhof said. Tends to be kind to. ”
Understand what it means to “lose” money
If you have money in your savings account or CD, the interest you earn may be overtaken by inflation. Therefore, as long as you maintain your principal, you lose purchasing power over time.
Again, if maintaining principal for more than a year or two is more important than the risk of losing principal (which can occur when investing in stocks), inflation-based losses are , Benny Hoff calls it a “sleepy return”.
But for long-term goals, get bigger profits and figure out how comfortable you feel at risk to prevent inflation from eating up your savings and profits.
“If we can increase our wealth over time, we will be better and safer as a person,” Adam said.
Keep calm. Do your best. Then “let go”
Rapid news coverage of rising gas and food prices and the story of the potential World War is worrisome. But don’t exchange news. Building financial security over time requires cool and stable hands.
“Make sure your feelings about the economy and the market don’t hinder your long-term growth. Keep investing and stay disciplined. History is that people, or even professionals, think about the market. It usually indicates something wrong. To reach your long-term goals, you just have to keep investing and stick to your allocations. ”
During the crisis of the last century, stocks usually returned faster than anyone expected at this time and were on average strong over time.
For example, according to data analyzed by First Trust Advisors, the S & P 500 has averaged 11% annual revenue until 2021 since the financial crisis of 2008. The worst year of the period was 2008, when stocks fell 38%. However, in most of the years that followed, the index recorded a rise. And four of those annual profits ranged from 23% to 30%.
For example, if fast growth stocks weigh too high, Adam proposes to redistribute some money to slow-growing, dividend-paying value stocks through investment trusts.
“If we build a well-diversified portfolio that matches time and risk tolerance, the recent market decline is likely to be just a moment in our long-term investment plans,” Williams said.
Remember: No one has the complete information, so it is impossible to make a complete choice.
“Gather facts. In addition to those facts, try to make the best decisions based on your individual goals and risk tolerance,” Adam said. Then she added, “Let’s go.”