The capital markets can be unpredictable. They can be up one day and down the next. Let’s look at what strategies may help you to build wealth in any market.
1. Build your financial foundation before investing
Consider building an emergency fund before making other, longer-term investments that may fluctuate in value. Begin with a cash or savings account for “everyday emergencies.”
2. Live beneath your means
We know this may sound like common sense, but it bears repeating: Americans generally have a lower savings rate compared to people in other countries. This can lead to financial strain when unexpected life events, like a job loss or a medical emergency, come out of nowhere.
The easiest way to manage your savings over time is by monitoring and limiting your day-to-day expenses. This can involve:
Knowing where your money is going.
Having clarity on needs versus wants.
Maximizing tax incentives.
Spending less than you earn.
Living beneath your means can be a very effective way to contribute to your savings. Later in life you may feel less compelled to chase risky investments with higher returns if you can build your savings gradually over time.
3. Diversify your income
The wealthiest people often have multiple sources of income, which makes them less dependent on a single income stream. Further, business owners and salespeople tend to make more than general employees. Do you already have a job you love? If your company allows it, consider starting a part-time business on the side. Even if you are a full-time student or stay-at-home parent, there are ways to earn money on the side, from being a weekend Uber driver to freelancing, consulting, or tutoring.
Take control of your income and protect your wallet.
4. Protect your loved ones
The average American earns more than a million dollars over a lifetime. Chances are, your earnings potential is your most important financial asset. If your family would suffer significant financial strain if you were no longer around or able to work, whole life insurance, convertible term insurance, and disability insurance are ways to consider protecting your income. Take precautions to protect you and your loved ones from unforeseen events.
5. Consider diversifying outside of the stock market
We all understand the concept of not putting all your eggs in one basket. Yet too often, investors interpret this to mean they should simply diversify their stocks. Being truly diversified means investing in different asset classes, not simply different types of stocks or mutual funds.
Diversified investment strategies that blend stocks (equities), bonds, and other investments and protection account types can smooth the investment experience when the stock market is experiencing turbulence.
Reach out to a financial advisor for more information.
6. Guard your mindset as well as your money
It’s not just portfolios that can suffer from economic, political, or personal upheaval. Stress can take a powerful toll on us and our decision-making. A financial advisor can help take the emotion out of investing and focus on your long-term goals, which often produces better returns than the average investor.
Talk to a Park Avenue® Wealth Management financial advisor to learn about strategies that may help you combat market volatility.