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How to shield your portfolio against this one type of risk

by , 22 September 2017
How to shield your portfolio against this one type of risk
No one can accurately predict where the markets will go in 2017.

The fact is, the markets become volatile in times of uncertainty.

And when the markets become volatile, there's a good chance your investments could decrease in value. This is simply known as market risk.

The main causes of market risk are recessions, political turmoil, natural disasters and terrorist attacks. Or even smaller domestic events such as interest and inflation rate changes.

So how do you protect your portfolio against market risk?

 

The answer is simple…
 

Cash.
 
You see, cash isn’t priced in large, liquid markets. There aren’t millions of people trading it back and forth a million times a day. 
 
It has no expiration date and you’re not locked into buying or selling at a particular time. So you don’t have to worry about market fluctuations hurting the performance of cash investments. 
 
By holding cash, you don’t have any market risk. The value of your cash isn’t going to change – Just make sure your cash investments are beating inflation.
 
Cash is also useful for when you finally find a good business trading at a cheap price. So when volatility hits and prices fall, you’ll be in a good position to buy great businesses for cheap.
 

Hold at least 10% of your portfolio in cash 
 

When we align our South African Investor Gone’ Fishin Portfolio, we always allocate at least 10% to cash investments.
 
The purpose of this portfolio is to make sure you take neither too much risk nor too little. It provides you with a balanced investment portfolio that ensures you outperform inflation and the market, every year. 
 
Every year, we re-align this portfolio to make sure we profit no matter what the markets do.
 
If you’d like to see which cash investment you must hold today, then take a look at the Gone Fishin’ Portfolio.

Knowledge brings you wealth,
Joshua Bento, Real Wealth



How to shield your portfolio against this one type of risk
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