With all the noise and volatility in the market and the world wondering when things will go back to “normal”, we’ve been reflecting on the impact of global economic events on our finances. In a span of 13 years, we’ve experienced two major events: the 2008 financial crisis and the 2020 Covid-19 pandemic, and it has made us question whether this level of uncertainly and volatility is the new norm and what we can do to protect ourselves.

2008 FINANCIAL CRISIS

We know that financial crises are not uncommon, but the 2008 financial crisis had a far-reaching impact that few could have envisioned. From job insecurity to large falls in markets, it was devastating on individuals and economies across our world.

2020 COVID 19 PANDEMIC

A similar situation manifested 12 years later, when the Covid-19 pandemic struck again raising new concerns over the uncertain future effects of this virus and the possibility of another global recession. To address this situation, the UK government introduced a furlough scheme which effectively became a vital safety net for businesses and workers caught up by economic uncertainty. But while this support protected jobs, it came at an inconvenient cost. The latest report released by the Office for Budget Responsibility indicates that Britain’s public debt increased by another £1 trillion and is now above 100% of the GDP.

The report also warns that while there are no guarantees, large economic shocks could become more common. With other major risks such as extreme weather events, infectious disease outbreaks and cyberattacks becoming more prevalent this century, we should remain vigilant and should aim to plan ahead because uncertainty has been on a steady rise over recent years.

PROTECTING YOUR assets

So how can you or individual investors protect your finances in times like these? Below are a few suggestions.

  1. You need a long-term plan.

One of the most important things to do when making financial decisions is to not only keep short term goals in mind, but also think about what you would want if you were looking back on these choices after 20, 30 or even 50 years.

It’s been a tough few years for investors, but things have calmed down since 2020. Many people who stuck to their investment strategy and didn’t panic, have seen improvements in the value of their investments. Similarly, the 2008 financial crisis was a major turning point in the markets, as it led to years of decreased investment and economic growth. Yet despite this impact on society at large, investments overall seem to have recuperated from their losses and continued to thrive.

When uncertainty is looming, it is important to keep on focusing on your long-term objectives. You might think that the markets will always send your retirement savings into a tailspin, but if you’re saving for retirement during your 40s then market volatility is unlikely to be an issue. That doesn’t mean it never happens and there are circumstances when changes should be made quickly with the help of a financial adviser.

  1. Expand your financial portfolio

The 2008 financial crisis and the 2020 pandemic have highlighted how interconnected the world is. It has been established, that events happening on the other side of the world can quickly spread and influence markets globally.

Although many sectors were negatively affected by the downturns, some experienced stability and thrived in these circumstances. A wise investment strategy would be to utilise the power of diversification which could help reduce your risk levels, should markets experience volatility. It’s important to choose a varied approach by investing in different industry sectors and geographic locations as well as different asset classes – this will help ensure profitability with less risk involved.

  1. Take risk into consideration

Managing and controlling risk is an essential aspect of financial planning. It can’t be eliminated but you must manage risk, so it doesn’t take a hold of your investment strategy.

There are a range of factors that you need to consider when making any investment decision, such as your goals and other assets you might have. However, there is one thing that will affect the risk profile more than anything else: whether or not an established company has delivered profits in the past and if it is a promising investment opportunity that can deliver a return on your investment.

Higher-risk investments have the potential to provide higher returns, which can be tempting. However, it’s important that you’re aware of your risk preference as your actions should be aligned to it. If the two don’t align, you could end up taking far more risk than is appropriate for you and potentially lose your initial investment.

You don’t want to put all your eggs in one basket. A diversified portfolio gives you the opportunity for greater returns, but also reduces risk if something goes wrong with any single investment.

Are you looking for ways to protect your investments and better manage risk and uncertainty?

Our team of financial advisers are happy to work with you and create a bespoke plan tailored to your needs, risk preferences, life goals and more.

Contact us today to get started.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is no guarantee of future performance.

Capital at risk.