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2020 has been a difficult year thus far with protests and the onset of the pandemic. It's forecasted that there will be a contraction of 5.2% of the global GDP in 2020 – one of the deepest recessions in years. Despite governments' efforts to minimize the impact of the financial situation, the pandemic is expected to leave long-lasting scars in various sectors and households.
With a few more months to go before the end of 2020, many of us are worrying about finances. Whether you've been investing for years or are new to investments in general, here are a few tips to help get you through the remainder of the year.
Always be prepared
When COVID-19 first hit in March, the stock market took a beating and crashed. While the market seems to be on the trajectory of recovering since the crash, you can't assume that another crash won't come. If COVID-19 continues to worsen, there might be another widespread lockdown that could impact stocks.
As an investor, you should be prepared for the volatility that the year brings. It's always better to be prepared than to panic and start unloading your investments because they're losing value.
Have diversity in your investments
With the volatility of the situation, you should have a diversified portfolio. That way, even if a particular business or market segment ends up taking a severe hit in the upcoming months, you won't be as affected. Stocks are in a much better place now than they were in March, so take the opportunity to take a look at your portfolio and make any necessary changes before the situation worsens again.
A great investment to take a look at during this period is active ETFs. If you're new to investing, you'd be happy to know that experienced portfolio managers manage these investments. Since a wide variety of investment strategies will also be utilized, it'll minimize your overall market risk – helpful in the current volatile market.
Have emergency savings
Since the economy is pretty much in a recession, you should have an emergency fund. That way, even if you end up being unemployed, you still have some funds on hand. Having an emergency fund also helps ensure that you don't end up tapping into your investment account, which could result in severe losses.
If you've still got a job at the moment, but some of your cash into the bank and start saving as much as you can before your financial situation worsens.
Focus on investing long-term
When it comes to investing, it's better to take a long-term approach. Despite the volatility of the market, stocks still have the potential for long-term returns. Even if they're not doing fantastic at the moment, you'll still get better returns than bonds. Rather than fixate on what's going to happen to your portfolio for the next couple of months, remind yourself to use a long-term lens to look at your investments instead.
Meet with a financial planner
If you're not sure where to begin, you can meet with a financial planner. They can help plan your financial future, set up an investment portfolio, and even advise on investments. You'll be able to get expert opinions and guidance for financial plans, and most of them are highly trained and experienced in the field. They can help with breaking down complex situations and layout of all the options for you.
Even though 2020 might be a rollercoaster of a year, it doesn't mean that you shouldn't be investing. By utilizing some of the tips above, you'll be able to kickstart the investing process or tweak your current investments. At the same time, try to create a financial plan and stick to it, so you've got an idea of what your financial situation is going to look like for the rest of the year.
Liz Westwood from UK on October 12, 2020:
You give good advice for investors in this helpful article.