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Global Recession: 10 Ways to Protect Your Portfolio From the Volatile Stock Market

The Investor's Guide to Avoiding Losses During This Recession

Newsweek Amplify - Global Recession

Warren Buffett, arguably the greatest investor in the world, says that there is only one rule of investing in markets: "Don't lose money." Fortunately, you don't need to have Buffett's financial knowhow to hedge against this recession. For those who have their life's savings or retirement funds invested in the market, there are a variety of steps you could take to keep yourself safe from the global recession.

Check out these 10 steps to know how you can insulate yourself from the inevitable stock market crash, and mitigate the hit your portfolio takes.

Change the Composition of Your Portfolio

Newsweek Amplify - Portfolio Composition

Whether it's a boom or recession, institutional investors and the top 1% always seem to be making huge profits. Well, here is their secret: Portfolio Composition. Most (99%) investors have a very basic portfolio, comprising 70% stocks and 30% bonds. But this traditional portfolio composition doesn't work in times of recession. And that is why the top 1% have opted for a foolproof and marginally different strategy: investing 50% of their capital in stocks, 20% in bonds, and 30% in private market real estate.

Real estate investment is suitable even for those who don't have very deep pockets. Through Real Estate Investment Trusts (REITs), you can invest in real estate with low capital. Just like buying a share of a company, REITs such as the one offered by DiversyFund permit you to buy a share of real estate, so you can own shares of a property at the Park Blvd in San Diego with just $500. This also helps to hedge the risk in the market by ensuring that you don't put all your eggs in one basket.

Diversify Your Investments

Newsweek Amplify - Diversifying

This is a very common strategy that people overlook, and keeping this in mind can help you earn returns in line with the top 1%. Even after you have decided on the composition of your portfolio, it doesn't end there--you need to diversify your portfolio even further to ensure that you have a finger in every pie. This is done for a simple reason: because whenever a particular industry isn't doing well, there has to be another industry that is doing well. The gains from one industry will help offset the losses from another, thus helping keep your portfolio balanced and profitable.

Even in the real estate industry, some degree of diversification is necessary. If you're investing your capital with DiversyFund, it diversifies your investments automatically, by investing your money in a vetted real estate portfolio comprised of multifamily rental properties.

Invest in Dividend Based Options

Newsweek Amplify - Dividend Based Options

There are two unique ways in which you can profit from your investments in the market: returns on the investment, and the overall appreciation of the investment. In case of stocks, the returns come in the form of regular dividends from well-performing companies, and the appreciation in the investment is indicated by the increasing market price of the stock in the market. While dividends are generally recurring, appreciation is a gradual process, and you can only capitalize on it at the time of sale.

Therefore, for those who rely on their investments as a source of income, it is always advisable to invest in stocks and commodities that offer regular and high dividends. This will enable you to get through the stock market crash without struggling or having to sell off your investments for survival.

DiversyFund offers a wide variety of options for you to invest in, and most of them have high rates of dividend payments. For example, on a $10,000 investment in Real Estate Investment Trusts (REITs) made in September 2019, you would have received approximately $40 every month as dividend, giving the bond a 5% annual dividend rate. And this is not to mention the capital gains that you will accrue during this time, which will be realized at the point of sale.

Keep Sufficient Cash for Emergencies

Newsweek Amplify - Having Emergency Funds

According to financial experts, quite possibly the worst thing you can do when the markets are falling is to sell your investments. Not only will you have to settle for pennies on the dollar, but it will also mean that you will miss the eventual market rebound.

Unfortunately, for those who do not have adequate cash in hand for emergencies, it might not be optional. Therefore, in addition to investing in dividend based securities, you must always have some cash stored separately for a rainy day, to help you survive the recession.

Understand That a Crash in the Stock Market Is Inevitable

Newsweek Amplify - Crashes are Inevitable

As any day trader could tell you, markets (and traders) thrive on volatility. This means that ups and downs in the market are a regular, recurring, and inevitable phenomenon. Every few years, the market will take a major dive, as a self-correcting mechanism. But after every dive, the market will also come back up to its normal level. Thus, the key is not to avoid the recession, the key is to survive it.

Predicting when the recession will occur is almost impossible, therefore it is best to always be prepared for it. This means monitoring the market for signs of recession, diversifying your portfolio, and making sure that you have enough fall-back options to survive the crash.

Limit the Investing Fees

Newsweek Amplify - Low Surcharges and Fees

As an investor, it is very important for you to be fully aware of the expenses and charges deductible from your returns. These may include brokerage, management charges, and middleman charges. These might be eating into your profits in a time when the stock market is already in a decline, and therefore you need to be searching for options that do not have such exorbitant charges.

One of the best ways to invest at zero fees is to invest in real estate directly with the managers. One such example is DiversyFund. Unlike investing with brokers and middlemen, DiversyFund is a fund that has skin in the game, so to speak, and has 0% management and brokerage fees. This ensures that your gains are higher since they're not affected by such surcharges. An understanding of the breakdown of how your broker charges their fees is a crucial step in investing, so you can select the best possible broker.

Keep Your Emotions in Check

Newsweek Amplify - Keeping Emotions in Check

It is very easy to get disheartened by seeing huge losses to your investment during times of high volatility in the recession. No one likes to see their 401(k) come down from $100,000 to $70,000. But making impulsive decisions at this time will only result in your digging yourself in deeper. This is not the time to sell your investments, rather, if you have surplus funds, this is a good time to invest in the market, since you get more of the same stocks for lower prices, preparing you for the future rebound.

Keeping your emotions in check, and remaining logical and disciplined is one of the fundamental things that differentiate a profitable investor from an unprofitable one, so let your discipline and focus work for you.

Invest in Un-Correlated Markets

Newsweek Amplify - Invest in Real Estate

Assets and commodities that do not fluctuate and move in tandem with the US markets might be a very good way to hedge your bets and prepare for the crisis since these will remain profitable even during the times of recession. One such un-correlated market is the real estate market, which is said to hold long-term value even during recessions.

With a fund like DiversyFund, you can invest in Real Estate Investment Trusts (REITs) to ward off the effects of the recession. This will help you maintain steady returns and appreciation even in these times of economic depression, keeping your retirement fund safe.

Determine Your Risk Profile Before Investing

Newsweek Amplify - Determine your Risk Profile

Every investment has a different risk associated with it, and the kind of investment you make should depend on your risk tolerance. For younger investors with higher risk appetites, small-cap stocks and forex investments might be a good option, but they are not suitable for old and retired investors who are not looking for long term returns. Therefore, for such older investors, large-cap stocks and real estate might be a better and more suitable option, due to the lower volatility of these options.

It is important before investing that you set your risk appetites and then look at options accordingly. Your risk tolerance might depend on your age, your objectives, and your investment timeline.

Don't Try to Micromanage

Newsweek Amplify - Don't Micro-Manage

One of the biggest traps you can fall into is micromanagement. Even if you do everything right, trying to micromanage all your investments can make them all come tumbling down like a pack of cards, leaving you with nothing. Ups and downs are natural in the market, and once you've invested your money, it might be more prudent to let it grow in the long term instead of repeatedly buying and selling every time the market makes a turn. Once you're in the game, stay in it for the long run, and watch your profits grow from big to bigger.

To hedge your bets from market volatility through REITs, sign up with DiversyFund now and start investing with as little as $500.

The contents of this article is for informational purposes only and does not constitute financial or investment advice. It's important to perform your own research and consider seeking advice from an independent financial professional before making any investment decisions.

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