People are now wondering what to do with their assets.
Here are two important things:
1. Care about your personal “overall package”
That means: Sharpen your pencil, get your calculator, and list all your assets. If you have never done this before, maybe out of laziness, NOW is really a good time.
How much money do you earn? How much money is in your bank account? How much is your portfolio worth? Do you own real estate? In short: list everything that displays your financial status quo and shows your actual net worth.
Then decide how much you want/need to adjust so that your overall assets are diversified best.
A solid rule of thumb could be 5-10% of your net worth being cash, 20-25 % in bonds, 30-35% real estate, 20-25% stocks/ETFs, 20-25% commodities (gold for example).*
No bitcoin? No, no bitcoin from my personal point of view. However, if you own bitcoin, I would say keep it, but don’t start to buy it. I personally would choose gold instead, because gold is still linked to a real asset (remember my latest blog posts).
2. Care about your “small packages”
After diversifying your “overall package”, you may want to do so within your assets, too.
Are you still happy with your stock portfolio and the asset allocation there? It was surely profitable, if your majority part was invested in US and European stocks, not so much in Asia. Do you think the future will be the same? Maybe you want to decrease US and Europe and increase Asia? This is not some advice rather than it should make you think about what companies need to adjust their business model as well. But if you are already invested, this should be no news to you anyways.
And there sure is homework to do: Which companies were expanding in Russia? What consequences will it have for them if they need to back up from there?
What about your ETFs? If you are holding MSCII World ETFs you are already good diversified. Personally, I’m not going to sell any shares of it but rather continue buying (and, so to speak, for a discount, at the moment).
Yes, this is just a VERY brief assignment. But as an overview on what needs to be done, it is complete. And it is mandatory that you do this and think about these things if you want to stay on course with your (financial) life plan. Also, if you do this homework, it is actually quite far from being brief.
Well, and if you are disappointed because you expected some REAL recommendations, I can only say this: First of all, every personal financial situation is different. There is no one-size-fits-all product. If someone wants to sell you one specific product without knowing you, run. No one knows how things develope. So basically everything is guessing. But you can optimize your guesses with the above diversification.
Finally: These all may seem to be luxury problems compared to what’s going on, especially if you know people in the Ukraine. But even luxury problems are problems that need to be solved. It makes no sense for you to be angry at “the bad world” and blame it being responsible if your savings go down the drain. It is your responsibility to stay responsible every time for those parts you can ultimately control. With the above actions, you take control.
For more specific in-depth strategy either financial, philosophical or psychological, please visit the book-recommendation section for some outstanding and helpful reads!
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* That doesn’t mean, of course, that you need to sell everything immediately to get to these numbers. But if you had $20.000 in cash and $80.000 in real estate, your portfolio would show a split of 20/80 – and therefore be highly imbalanced.
To become more diversified, in this case, just start to increase your savings from now on for stocks/ETFs, etc. so that automatically the cash and real estate portion decreases percentwise.
Simplified example: Over the next month, you buy stocks/ETFs for $10.000 while you had incoming cash of $5.000. Now your portfolio would look like
Cash: $15.000
Stocks/ETFs: $10.000
Real estate: $80.000
In percentages, your portfolio would now look 14% (cash), 10% (stocks/ETFs), 76% (real estate).