Market volatility can be hard to predict. It can stem from a variety of different reasons — including geopolitical strife, earnings reports, societal trends and policy changes among others — and the effect can be discouraging for even the most seasoned investors.
Worst of all, market volatility is often impossible to avoid entirely.
The global market has benefited from above-average stability over the past decade, with the S&P offering double-digit returns in seven of the past nine years.
However, after the S&P boasted astounding 22% returns in 2017, the market crashed down to 6.8% in 2018, the worst showing since the Great Recession. In addition, the Dow Jones varied by 1,000 points or more on five different days last year, something that has only happened eight times in history.
When it comes to Wall Street, market volatility should be expected. It’s difficult to escape unexpected political uncertainties, especially when they’re occurring in other countries.
However, there are steps that apt investors can take to ensure that they mitigate the ill effects of market volatility.
Here are four tips for protecting your investments from market volatility.
1.Diversify your Portfolio
One of the most important principles of investing is to spread your capital around.
Diversifying your investments ensures that you’re not banking on the outcome of a single investment. This results in a balanced portfolio that can help offset any declines in value with increases in other investments. Plus, diversifying your portfolio can help individuals that are more interested in preserving capital than they are gaining from their investments.
The key to spreading your capital around when you’re investing is to have a healthy mix of high-risk and low-risk assets This allows you to build an investment portfolio that can bring back healthy returns without being too aggressive.
High-risk assets, also known as growth assets, include company shares, real estate and equities, and have the potential to provide long-term capital gain to investors. However, they carry far more risk than defensive assets, such as cash and fixed interest investments.
Spreading your capital across different industries also counts as diversifying your portfolio, as it can mitigate any damage resulting from sector-specific product shortages, price changes or other events.
2. Buy Low and Sell High
Market volatility isn’t going anywhere. It will remain a determining factor in many of the world’s stock markets, wreaking havoc on unprepared investors and fund managers. Rather than hiding from this, it could pay dividends for investors to use this knowledge to their advantage.
Understanding the ebbs and flows of the market allows investors can purchase the assets that are declining in value but are sure to be on the rise once more in the foreseeable future.
Similarly, investments that seem to be performing far better than projected in the long term can be sold at a high value before they come crashing down to reality.
It’s impossible to know when an asset will hit its highest or lowest value. However, playing off of the incremental swings in value can help boost returns.
3. Utilize Market Research
Another way to avoid market volatility is to understand the social, political, and economical climate surrounding the assets that you are investing in. Understanding the context of each investment can drastically limit the risk associated with each investment.
For instance, the risk involved with investing in real estate could vary for better or for worse depending on upcoming policy changes, population trends, income levels and more.
Using this to your advantage allows you to maximize the potential of each investment, ensuring your assets are shielded from unnecessary risk.
4. Invest in Assets with Inherent Value
One of the best strategies for avoiding market volatility is to invest in assets that carry real value. Unlike fiat currencies and other assets that have values determined by the government, precious metals such as gold have inherent value.
As seen below, investing in precious metals like silver and gold provides portfolios with a way to mitigate losses from potential tail-risk events by ensuring they are not entirely dependent on market strength.
For centuries, gold has been in high demand around the world, showcasing the high liquidity of the precious metal. Since gold isn’t an asset specific to any particular country, it can be invested in without worry of potential geopolitical strife. This improves its already-high liquidity by allowing anyone to invest in it.
Plus, gold is an asset that investors truly own, without any contractual obligations to a third party. This is a stark difference between precious metals like gold and fiat currencies, which are technically not owned by the investor.
For these reasons, most investors and fund managers recommend at least 5% to 10% of any investment portfolio should be in gold. It’s virtually independent from market volatility, and its limited supply makes it likely that the asset will appreciate in value over time.
G-Coin Helps Investors Protect their Assets
While all of these strategies can help investors shield their assets from unnecessary market volatility, investing in gold remains the best way to protect your money.
Lacking the market dependency and fluctuating value, gold can provide investment portfolios with the stability that they need to survive the effects of any external market forces.
The best way to invest in gold is with G-Coin, the company that has reinvented the way that gold is used in investments and payments.
G-Coin provides an investment asset that benefits from the liquidity and inherent value of gold, along with the convenience and security of a digital token.
We have created digitized gold — G-Coin tokens — that are backed one-to-one by responsibly-sourced gold. These assets run on a network armed with state-of-the-art security and robust KYC and AML compliance procedures, ensuring your assets are safe at all times.
Plus, we use powerful blockchain technology to enable the highest level of trust and transparency.
We monitor each physical gram of gold from mine to vault to prove its provenance, grade, and origin, protecting investors from fraud and opening the global market to ethically-sourced gold as an investment option.
Our innovative G-Coin tokens have created new markets and new methods for investing, providing a trusted platform for businesses and consumers to buy and sell with, and invest in, ethically-sourced gold.
Sign up today to learn how G-Coin is protecting investors from the unpredictable whims of market volatility.