Political changes can create market volatility, no matter your views. It’s a good time to revisit your financial foundation and ensure your strategy still fits your long-term goals.
Rather than predicting outcomes, focus on building resilience into your plan. These seven strategies can help protect your money from disruptions and position you for future opportunities.
Though markets are unpredictable, these steps make sense in any economy. In uncertain times, wise investors turn to professionals to keep their plans on track.
Pro Tip: Professional guidance can be invaluable during market uncertainty. If you’ve got at least $100,000 in investments. SmartAsset offers a free service that matches you to a vetted, fiduciary advisor in less than 5 minutes.
1. Diversify investments across multiple sectors
Spreading investments across industries helps protect against sector-specific policy impacts. Technology, healthcare, energy, and finance react differently to new regulations or trade policies.
Review your portfolio to ensure it’s not overly concentrated in one or two industries, which could expose you to higher risk from regulatory changes.
Index funds offer diversification but also include a mix of company sizes, from large businesses to smaller growth companies. To further diversify, consider alternative investments beyond stocks and bonds.
Pro Tip: One modern way to strengthen your portfolio’s resilience is with alternative assets. Companies like Fundrise offer real estate and venture capital investments as small as $10.
2. Increase international exposure
The U.S. makes up less than half of the global stock market, so adding international investments can help protect your portfolio from domestic policy impacts.
Many advisors recommend allocating 20-40% of your equity portfolio to international markets, including developed and emerging economies, to access global growth while reducing reliance on U.S. policies.
Low-cost international index funds or ETFs offer an easy way to diversify without researching individual foreign companies. Precious metals can also hedge against currency fluctuations and geopolitical risks.
Pro Tip: Protect your wealth with an asset that can hedge against the damaging effects of a recession and financial calamity by opening a gold IRA.
3. Build a larger emergency fund
Policy uncertainty can lead to economic unpredictability, affecting employment, interest rates, and inflation. A solid emergency fund offers crucial support during transitions.
Experts recommend saving 3-6 months of expenses, but 6-12 months may be wise in uncertain times. This cushion helps you avoid selling investments during market downturns.
Keep emergency funds in FDIC-insured high-yield savings accounts or money market funds for easy access and competitive interest that helps offset inflation. High-yield accounts can significantly grow your emergency savings over time.
Pro Tip: Earn as much as possible on your emergency savings during uncertain times. For example, SoFi Checking is offering 3.8% interest, plus a potential $300 signup bonus. (May change without notice.)
4. Invest in inflation-protected securities
Policies like higher spending, tariffs, or Fed changes can increase inflation risk. Treasury Inflation-Protected Securities (TIPS) and I Bonds offer protection against rising prices.
TIPS adjust based on the Consumer Price Index, while I Bonds combine a fixed rate with a semiannual inflation adjustment.
Allocate part of your fixed-income investments to these securities, especially if you’re nearing or in retirement. Diversifying beyond government securities further strengthens your inflation defense.
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5. Reassess bond portfolio duration
Interest rate sensitivity is crucial during policy transitions. Rising rates, which may occur in response to certain policies, affect bonds with longer maturities more.
Shortening your bond portfolio’s duration can reduce interest rate risk. Bond ladders, which spread investments across varying maturities, offer income while managing this risk.
For many, keeping bond duration under five years strikes a balance between yield and protection against rate increases. These adjustments depend on your financial situation and retirement timeline.
Pro Tip: If you have over $150,000 in savings, fine-tuning your bond strategy is critical. Zoe Financial is a free service that will match you with a pro in your area who can help optimize your fixed-income investments.
6. Consider alternative investments
Alternative investments, such as REITs and commodities like gold and silver, offer valuable diversification and can react differently to policy changes, protecting against inflation and economic uncertainty.
REITs (Real Estate Investment Trusts) typically perform well during moderate inflation, offering steady income through dividends, as real estate values rise with inflation. Gold and silver are considered safe-haven assets, often as hedges during currency devaluation or geopolitical instability.
Allocating 5-15% of your portfolio to these alternatives and leveraging technology for easier access can strengthen your overall financial strategy by enhancing diversification and reducing risk.
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7. Review insurance coverage
Financial protection goes beyond investments. Insurance offers a crucial safety net during economic transitions.
Review your health, life, disability, home, and auto insurance to ensure adequate coverage. Policy changes in healthcare or tax treatment may impact your coverage needs.
Consider an umbrella liability policy if you have significant assets at risk in a lawsuit. Periodically shopping around helps ensure competitive rates without compromising coverage.
Pro Tip: Ensure your home insurance is up to date and cost-effective. Compare quotes from top providers to find better coverage and save money today!
Your opportunity to strengthen financial foundations
View policy uncertainty as an opportunity to strengthen financial resilience. Many protective strategies are good financial planning, regardless of which policies are enacted.
By taking action now, you’re not just mitigating risks but also building a more robust financial foundation to withstand future economic conditions.
Leveraging existing assets can provide added security for seniors concerned about retirement income.
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