A new year means a new start in many ways for investors. Most investors would probably hope to forget about 2018 which, after a tremendous start, ended the year with most assets in the red. Those who bought heavily into stock markets in the hopes that the bull market would continue its magnificent run were sorely disappointed by the year’s end. And with 2019 getting off to a rough start, investors are probably interested in making some new resolutions of their own in order to ensure that they remain as successful as possible in the new year.
1. Pay Attention to the Business Cycle
First on the list of every investor should be the resolve to pay attention to the business cycle. While much of the initial post-2008 time frame saw markets unsure of which direction stocks would head, the past three years have witnessed a phenomenal bull market. More Americans became 401(k) millionaires than ever before, and high stock markets brought back a confidence in the economy that had been missing for years.
But everything that goes up must eventually come down, and stock markets are no exception. The falls in stock markets to end 2018 are the first indication of a coming stock market crash which could see a return of the 50% market losses we saw during the last financial crisis. Investors need to keep an eye out for market developments and take steps to protect their assets before markets begin to crash.
2. Save as Much as Possible
This one should go without saying, but investors need to save as much money as possible. That’s not just to save money for retirement, but also to make sure that they have plenty of money on hand once the economy turns south. Failing to have several months of living expenses available in relatively liquid investments could mean that many households will have to dip into retirement savings in order to pay everyday expenses. That’s not a good thing for any investor to have happen.
Having a large cash or cash-equivalent nest egg building up will also be a benefit in a bear market. Not only will cash outperform a falling stock market, it will also allow investors to get back in to markets once they’re bottomed out. Investors who put their money into the markets while the Dow Jones was near its bottom at 7,000 points saw significantly better returns than those who had bought near the previous top at 14,000 points.
3. Diversify Your Portfolio
By now it should be clear to every investor that a portfolio heavily invested in stocks will likely be a big loser in 2019. But thinking that diversification means getting into bonds, CDs, or mutual funds won’t likely help things. The bond market is also at the tail end of its bull market, with rising interest rates meaning that bond prices will fall. Those rising interest rates also mean that products such as CDs aren’t a great idea either, as many investors may lock in subpar interest rates and lose out on potential gains. And with the prospect of a major market crash growing more likely all the time, mutual funds will likely be big losers too.
It’s important for investors to diversify into countercyclical assets such as gold that perform well when overall financial markets are performing poorly. Remember that gold gained 25% in value when stock markets lost 50% of their value during the financial crisis. And with more and more investors flocking to gold in recent months now that stock markets are weakening, there’s every indication that gold will perform just as well during the next financial crisis.
4. Simplify Your Financial Accounts
The new year could be a time to consolidate your financial accounts and make things easier on you. Whether you have multiple credit card accounts that you’re no longer using, bank or credit union accounts with multiple institutions, or retirement accounts at previous employers, you may benefit by decreasing the amount of work you have to do keeping track of all those accounts.
Especially if you have your retirement assets spread across multiple different accounts, you can benefit from consolidating your assets. Why leave money sitting in a former employer’s 401(k) account when you can roll it over tax-free into a gold IRA? Take advantage of the new year by figuring out which accounts you really need to maintain and which ones can serve you better by being closed or consolidated.
5. Look at Alternative Investments
Most investors have no clue what to do when stock and bond markets decline. They’re so focused on financial assets that they have no idea that there are numerous alternative investments available. Those include gold and silver, commodities, and real estate, among others. The options are really limitless, but most investors don’t know how to get started in investing in alternative assets. Most brokerages only offer the well-known standards: stocks, bonds, mutual funds, CDs, etc.
Investors who want to broaden their opportunities and diversify their portfolios have to do their own research, but they will often be greatly rewarded for the effort. Those who got into gold before the last financial crisis saw their assets protected and their decision to diversify into alternative assets vindicated. If the next crisis is as severe as the last one, only those who successfully invest in alternatives early enough will keep their portfolios from taking major losses.