Investing in Uncertainty: How Your Portfolio Can Navigate The Uncertain Financial Landscape

The Coronavirus pandemic has brought with it widespread disruption across the world. As global stock markets continue to tumble, investors are facing up to one of the most testing periods they’re likely to have seen. 

With countless industries grinding to a halt as lockdown measures prevent business operations, the markets have reacted with extreme volatility, with much economic activity becoming non-existent. 

Key indexes like the S&P 500 and Dow Jones Industrials have become subject to wild daily swings of around 5%, a rate that’s become more frequent in the past few weeks than it was in the 12 years prior. 

The record-breaking 10% decline in the stock market back in late February has been matched on numerous occasions in the weeks since, and March 11th saw a 10% drop in value recorded within a single day. 

It’s natural to see such figures and feel the urge to withdraw your investments and hibernate until we see a return to normality. However, the sad truth about investing is that you only ever make a loss until you withdraw a depreciating portfolio. 

While there’s plenty of market jitters from investors across the world, there are still opportunities to build portfolios that can help to ensure that you continue to yield profitable returns in the long term. Let’s take a deeper look into how you can navigate your portfolio through the uncertain financial landscape:

Take Care In Catching The Bottom

One of the most anticipated investment strategies since the full effects of Coronavirus emerged involved ‘catching the bottom’ of falling markets. 

Catching the bottom is the approach where investors anticipate the collapse of stocks and begin investing, or re-investing when they appear to have dropped as far as they’re likely to fall. 

This approach was undertaken successfully by investors during the fallout of the 2008 financial crash and is highly regarded as a safe strategy due to the fact that markets often recover over time. 

However, COVID-19 is a little bit more difficult to read than recent bear markets. As the industry comes to a standstill, losses could be felt long into the future. 

It’s highly likely that markets will recover to their early 2020 highs over time, but anticipating where rock bottom could be might lead to a series of false dawns. 

To better illustrate how false dawns can lead to misjudgments in the market, The Motley Fool refers to investments made in late November 2008, in the midst of the largest global market downturn for 80 years. The early signs suggested that a recovery was underway, and yet by March 2009 stocks had fallen 29% from their January peak. 

Despite there being clear lessons to learn regarding timing, the technique of catching the bottom has historically served investors well. Whether they really do time their investments to perfection or decide to buy earlier or later, market recoveries can generally be relied upon.

Consider International Stock Funds

In the short term, it’s worth looking deeper into international stocks. Nations are adopting varied approaches to combatting Coronavirus, with differing results. This means that different economies could recover at different rates. 

One of the most effective ways of diversifying your investment risk and turning prospective profits from international economic recoveries is by looking to the Schwab International Equity ETF SCHF. 

This particular fund can help investors to access over 1,500 stocks from developed markets worldwide. Countries like Japan, the UK and France have plenty of coverage within the ETF’s portfolio, and esteemed names like Nestle, Samsung and Roche are all accessible. What’s more, is that the fund has a lower expense fee of 0.06% - leaving less margin for risk. 

International lockdowns will come and go at different times. As China already begins its recovery into returning to normal life, other nations may soon be ready to follow suit. Be sure to take the time to consider the viability of the wider world when looking to protect your portfolio. 

Revise Your Diversification

Naturally, regardless of the difficulty facing the stock markets, there’s never a reason to avoid diversifying your portfolio. There’s no better way of future-proofing your revenue than by looking at owning shares within a wider range of industries and sectors. 

Take the time to look at your portfolio and scrutinize where your investments are. Try not to concentrate on a handful of stocks or funds and try to find a wider range of funds in more industries within a larger array of countries. 

Try to avoid industries that have been thrown into uncertainty following the emergence of the pandemic, like travel and tourism for instance, but aim to adopt a variety of goals and targeted returns. 

In the midst of this unprecedented level of disruption, it can be tempting to take a punt on a specific stock or market, but acting on a whim at a time of uncertainty will most likely hurt your chances of returning profits rather than help them.