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Three risks facing your investments and how to deal with them

by , 18 September 2015

The last few weeks have seen extreme volatility on global markets. It's been hard work for both investors and traders to cope with what's been going on.

The Volatility Index hit levels not seen in six years.

So what are the risks facing your portfolio at the moment? And how can you deal with them?

Read on to find out…

Investment risk #1: China

In June, the Chinese stock market bubble burst and since then the market has been ebbing lower. This is in spite of measures taken by the Chinese government to prop it up.

This is the first investment risk you need to worry about, Tom Gentile in Money Morning US explains.

Many investors in China have lost a lot of money.

This coincides with a slowing of the Chinese economy. Even though growth is slowing, it’s still growing at rates far higher than the US or Europe.

Investment risk #2: Commodities

The slowdown in China is having a knock on effect on commodities. There is a worldwide slowdown in demand for resources.

Think about how much the oil price has fallen over the past year or so, and copper. Oil is a great measure of production and copper is a great measure of consumption.

Investment risk #3: Currencies

This year, the dollar has strengthened against so many other currencies. For instance, the New Zealand dollar has lost 17% against the US dollar.

These risks all link together.

With China’s economy slowing, it hits commodities. This makes commodity producing countries’ currencies devalue. This chain reaction could get worse as the year comes to an end.

Two sectors to invest in that avoid these risks

With the above risks in mind, it’s a good idea to avoid investing in stocks that will feel the wrath of any of them.

There are two sectors to look at. These are:

  1. Consumer services; and
  2. Healthcare.

So there you have it. Three risks facing your investments and how to deal with them.

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Three risks facing your investments and how to deal with them
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