Welcome to the fourth Monday in the month of January 2022! I am pretty sure that I am not the only one wondering when this month will finally come to an end.
This week, we will be looking at something I believe we all need to consider at times like this – times of shrinking investment options and market uncertainties.
Times like this (in my opinion), call for a form of conservatism – at least till there is a clear indication of what is exactly going on. This call is actually predicated on the view that asset prices are expected to decline (especially for those with foreign stocks and cryptocurrency assets in their portfolio).
Mind you, I am not advocating that investors do not take advantage of falling prices i.e., buy the dip. All I am saying is that “buying the dip” can still be speculative especially when most people are still sure of how low prices will fall.
Conservative investing according to Investopedia is an investment strategy that prioritizes the preservation of one’s capital overgrowth or market returns.
This is done through investing in low-risk assets such as fixed income securities, money markets, and mutual funds. Some people also advocate for investments in blue-chip shares and or real estate.
In such instances, a large proportion of one’s portfolio is held in fixed income assets as well as cash and near-cash instruments than in shares or in other assets deemed risky such as cryptocurrency.
This advice is particularly helpful for older investors as well as individuals who naturally have low-risk tolerance or even those with limited investment capital.
In addition, investors with a medium to high-risk tolerance may also adopt this strategy when it is expected that prices may crash. For such investors, this stance is a protective one aimed at protecting their funds. This group of investors typically return back to their assets of choice when markets are settled.
In conclusion, it is key to remember that the aim at times like this is to preserve one’s capital from any loss and not necessarily earn maximum returns. The motto here is “preserve the capital, interest will take care of itself”.
We will all do well to remember that the Omicron variant of COVID 19 is very contagious though mild.
Please maintain social distancing, wear your face masks in public and if you are yet to, vaccines (boosters inclusive) are still be administered to those qualified to receive them. Do have a fantastic week ahead.