Investing is a long game and you should build your portfolio to grow over decades rather than months. However, even the most hardened investors find themselves panicking at the sight of market volatility, so how do you ride it out?
This article will provide five strategies to help you navigate volatile markets. By giving you the tools to thrive when times get tough, we’ll help you prosper in the world of investing.
1. Reduce your tax-loss
When the market drops, it might mean dropping an investment, too. Whether it’s an investment that’s already been underperforming or another that doesn’t fit your strategy, a drop in value is an opportunity to sell and take advantage of tax allowances.
By this, we mean you can use losses to reduce the tax burden on your future gains. Also, since it’s worth less at the time of sale, you might avoid capital gains tax altogether.
2. Diversify your portfolio
A market downturn could hit you hard if diversification isn’t built into your investment strategy. If you hold your assets in one particular type or group, for example, you’re asking for trouble in times of volatility.
To diversify, include stocks from other countries as well as bonds, cash, and other investment types. You should also explore businesses in different industries so if one of them struggles you have others to help you weather the storm.
3. Take advantage of low prices
In times of volatility, built-to-last businesses may have reduced stock prices, which you can take advantage of. Some might even sell cheap to appeal to investors, which can set you up for when markets improve and these large businesses prosper again.
Please note that this can be a risky strategy that you shouldn’t go alone, so consult with a financial adviser who understands how to time these purchases. It might be a case of buying over a set period rather than going all in and aiming for the lowest point in the market, for example.
4. Maximise your gifts
When interest rates are rocketing, your loved ones may struggle to afford a new house without a mammoth deposit. You can make gifts to make sure they can afford their dream home and negate inflation and interest rates.
You can also transfer investments into trusts, which can be used to contribute to life events for children or grandchildren, such as university fees and weddings. Trusts keep your gains free from inheritance tax, too, which aids growth and minimises tax liabilities for your loved ones.
5. Review your insurance
When rates are down and markets are in disarray, insurance premiums might also experience a drop. A crucial part of your investment portfolio and wealth management strategy, you could protect yourself and your loved ones with personal insurance that’s cheaper than usual.
Conclusion
At Cedar House Financial, we have years of investment experience and can help you develop a strategy that works for you. Considering your risk appetite, long-term goals, and personal situation, we tailor every decision around your requirements and help you grow your wealth.
Contact our team to get started or to find out more.