Feeling the stress on making your financial decisions during unprecedented times like this? We feel you. As we navigate through this uncertain economic climate, we hope to make things a little clearer for you trying to figure out their next move in the midst of this pandemic. Don’t forget to ask yourself these questions before you make your move.
Are you emergency savings fully funded?
With this level of uncertainty Covid-19 brings, it is not hard to understand the importance of emergency funds by now. But how much is enough? Your rainy day fund should be stocked with 3 to 8 months of expenses, given if you lose your job and are unable to find a new one right away. If you do not have the amount of savings well prepared for the rainy day, it is better to save up before trading as this pandemic might affect your job security.
How much risk can you tolerate?
Once you have your savings in place and are ready to venture into the financial market, calculate your risk tolerance. Take a hard look at how much money you are able to lose without affecting your livelihood, at least for the next 6 months. Don’t forget to take in factors like your age, necessity expenses and job security.
Have you done your research on the market?
As the massive impact of the pandemic plays out, it is mostly likely that traders will experience high volatility in the financial market. Hence, before you dive in and start trading, remember to get your feet wet by educating yourself on how Covid-19 will impact countries, industries and whatnot. Having a comprehensive view of all things can bring impact to the market, from the news to your own biases, it can be the best way to sharpen your trading strategy.
If you are going to invest, how would you like to diversify your portfolio?
Don’t start if you are not considering diversifying your portfolio. Putting all eggs into one basket is especially dangerous during an unprecedented period like this. Many analysts agree that the biggest piece of advice to give in order to protect traders from succumbing to their own biases is diversification. It reduces the fragility of your portfolio and mitigate your loss when prices move out of sync with each other.