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6 Frugal Ways to Protect Your Investments

When it comes to our income, numbers seem to be in favor: real gross domestic product grew at 2.5 rates in the fourth quarter of 2017 – and personal income registered a 0.6 increase in January 2018.

Yet, the economy tends to go up and down all the time. So, it’s only natural to plan ahead and do your best to protect yourself and your investments. Whether is real estate, stocks, bonds, mutual funds, or ETFs, you need to invest wisely to make sure you get enough benefits without risking your life savings.

You know how they say, hoping for the best, but preparing for the worst? Check these tried and tested ideas to protect your investments from any market crash or some unpredictable market corrections:

Keep an Eye on Your Retirement Funds

First and most important, never reduce or eliminate contributions to your 401(k), no matter how much time you still have until retirement. In this game, the longer you invest, the higher the income in the long run.

Better than that, this investment is tax-free and generally brings in extra money from matching contributions from your employer. So, make sure your contribution rate is high enough to get as many benefits as possible – which is usually around 10 to 15 percent of your wage.

If you invest in alternative retirement funds as well, you need to calculate your risk tolerance. This way, you know how much you afford to lose in case of unpredictable market changes. With this information in hand, you can choose financial services companies that stay in line with your beliefs – to keep your savings safe.

Reduce Your Debts

When the stock market falls, or worse, you deal with a market crash, you need to have enough stability not to make foolish moves. This means – the less debts you have, the higher your chances to pass the crisis without selling your portfolio to cover the loss.

The first step is to identify all your debts. Then list your debts from highest to lowest, depending on their interest rates. You need to start paying off loans and credit cards with the highest interest rates first. This way, you’ll save money in the long run and not worry about repairing your credit. You’ll be spending less with interest, and you’ll get to cover more of your actual debts.

Invest in Bonds

Large companies and governments issue bonds to raise money. As basically bonds are risk-free, the return on investment is very low compared to stocks. However, most experts consider them a better investment than a savings account, for example. This is a synonym for stability – they offer a fixed interest rate, directly proportionate to the inflation, so you don’t lose money, while still making some minimal profits.

In simple words, stocks can help you earn serious money, while bonds are great tools to preserve the money you have. So, if you’re looking to keep part of your money safe, bonds are the best choice. But, as growth is equally important in the long run, you need to find a balance between bonds and other investments.

Bonds should cover around 10 to 20 percent of your savings until you’re 40. As you get closer to your retirement, you should start moving most of your money to bonds. Once you retire, try to keep as much as 65-75 percent of your savings in bonds.

Open a Savings Account

Having cash in hand is essential when you’re looking to protect your investments in the long run. This doesn’t mean you must stop depositing money in your bank account each month. You can also buy cash-equivalents, such as certificates of deposit, short-term bonds, or Treasury bills.

When you have savings you can rely on, you don’t feel tempted to quit on your long-term investments just to cover monthly expenses. An ideal savings account should help you cover six months of expenses.

A savings account is a safety net, in case you lose your job. This way, you can cover your expenses without you needing to sell your stocks at low prices. Plus, it can also help you keep debts low.

Stay Away from Scams

Investment schemes generate high loss among investors. In fact, they cost Americans over $30 million in 2017 alone – and this is what people report. Many scams remain undiscovered, as people are too ashamed to admit they’ve been fooled.

Phishing, unexpected prizes, lottery scams, or buying and selling scams can easily convince you to give your money away. Don’t let yourself impressed by stories. If it’s too beautiful to be true, then it’s not true.

Research before investing money. Better than that, choose the safe path – large financial companies, banks, or retirement funds companies. They offer you smaller interests and fewer earnings in the long run, but they’re stable, safe, and easy to communicate with.

If you have any doubts about the honesty of a company, take your time to do some proper research before investing. Scammers are always looking to rush things. Keeping things on the slow motion can save you from fraud in most occasions. Learn more about what is considered theft in Colorado or any other state, to be able to protect yourself from scammers of all ages.

Keep a Balance between Stocks and Other Investments

Most of your investments can be in stocks, through mutual funds, depending on the financial companies you’re working with. Stock investment companies are a good place to start. But, if you’re willing to try investing in individual stocks, you should pay attention to how much money you invest, as they carry high risk.

Try to keep your individual investments in stocks under 10 percent of your portfolio. This way, you keep your savings safe. You won’t skyrocket your profits, but you won’t lose sleep either if market falls. You know how they say. Better safe than sorry. Especially when we’re talking about your money.

Peter Christopher

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