Most investors have now rightfully made the decision to be much more defensive in how they pick stocks and allocate their portfolios. In this article, I’m going to discuss a few ways investors can protect against a market crash and further volatility moving forward.
Hedging one’s portfolio is certainly one way to go. There are a number of great ways to hedge one’s portfolio. One method is using options, however, this is perhaps too sophisticated a method for many readers.
Other methods include investing in gold, or buying certain Exchange Traded Funds (ETFs) which have been set up to inversely track the broader stock market. One benefit of investing in ETFs is the ability to quickly and easily diversify one’s portfolio.
Hedges work in the short term. But for investors seeking a more permanent, long-term solution, perhaps the best way to protect oneself from continued volatility is to re-balance one’s portfolio into more defensive names with strong balance sheets.
The financial markets are now pricing in some serious recessionary and deflationary medium-term pressures.
Therefore, finding companies that have the dry powder to weather one or two very bad years is likely to be a decent course of action.
Companies with too much leverage, or too much growth baked into their stock prices are likely to get burned in a big way as markets re-calibrate globally.
Invest wisely, my friends.
