The Shadow Banker’s Secrets: Lessons From 2008: How to Protect Your Investment Portfolio From Market Crises
The bear market of 2022 caught most investors by surprise. The selloff is today blamed on the Federal Reserve’s comments about how it would start raising interest rates. However, by the time they made the first rate hike, stocks had been selling off for months.
The market move higher in 2023 looks much like a mirror image. The view that interest rates would eventually stop rising, even if it’s not quite done yet, have pushed stocks higher.
These moves indicate that investors are often caught unaware from the impact of a changing market. With stocks trending higher now, investors should give some thought to protecting from the next inevitable downturn.
One characteristic of a market selloff is rising volatility. Markets make larger percentage moves on a daily basis. That can lead to wild swings in valuation. Investors who use strategies such as covered call writing can take some volatility out of their individual stock positions.
Real estate has seen some big swings during market selloffs, as investors likely still have strong memories of the 2008 real estate crash.
Investors can use insurance to protect their properties, and also focus on generating long-term income to weather a storm. As long as a property can cash flow, the likelihood of a foreclosure remains low.