The pandemic caused so much suffering. But one of the things that we should be grateful for is that we are not part of the grim statistics. It also allows us to assess our financial standing. With that said, have you evaluated your economic position? Are you comfortable with your current status?
It is tempting to blindly follow some dubious financial advice that one should invest in a bear market. Unless you are a masochist, you should not take such a step. Even if you are purchasing stocks, which gurus consider low risk, you should not tempt fate.
Before you gamble on your future, let us review the different options available for you. Fair warning ahead! Kindly continue with your research before making any decision. Doing this will lessen your financial exposure.
Investing in this is a safe bet. But the amount that you will pour in might be substantial enough to make the transaction risky, so you need to know more about what you are joining. First, let us define what financial instruments are. Then we will discuss how to minimize your financial exposure when it comes to this type of investment.
A financial instrument is a contract. When you buy one, the issuing company gives a certificate. It entitles you to receive interest. You might be wondering if this is the same as negotiable instruments. No, they are not.
Both are contracts. But a negotiable instrument is a high-risk asset, which arises in the normal operating cycle. They also have a finite lifespan. On the other hand, you can bequeath a financial instrument to future generations.
Bonds and stocks are examples of financial instruments. When buying one, you must assess if the company has the capability of paying the interest. You can do this by reviewing their consolidated financial statements. This document will tell you if the entity is profitable and if it is stable.
Currently, the housing prices are going up, and three construction companies caught your eye. The first entity has the most expensive stocks but is the most profitable. Company B’s shares are the cheapest because it is not doing financially well. Lastly, the third organization’s stock has a median-range price. It reported a steady profit for the past five years.
In this scenario, purchasing stocks from the first corporation is an excellent choice. But if you find the price too steep, you can opt for Company C. It is not as expensive as the first one. But your financial exposure is not as great as Company B.
Considering the factoid that we shared earlier, you should seriously consider investing in the real estate market. According to the Guardian, banks are offering low mortgage rates. You can flip the property for a quick profit. Or you can lease it for passive income.
In this type of investment, you need to pour in additional funds. Let us say that you found two promising properties. One has some minor roofing issues that you can fix with quality PVC plastic sheets. On the other hand, the other option is several thousand pounds more expensive. But it has no building concerns.
Purchasing the first property is an excellent move. But before doing so, you may want to verify if the roofing issue is the only problem. You might end up paying more for the minor repair jobs. But if there are no other concerns, then go ahead and buy it.
Another factor that you need to consider is the location of the properties. The more expensive lot might be in a highly urbanized area. It means that the price is acceptable.
The World Economic Forum reported that over 100 million people lost their jobs last year. Although governments tried to mitigate the adverse effect of the pandemic, most of us felt the financial crunch. We had to use our savings to make ends meet.
With many people getting vaccinated, we can say that we are already rounding the curb. But economists have a grim outlook. They say that the markets will continue to slump. In this case, it is prudent to establish an emergency fund.
You need to establish enough funds to cover living expenses for at least three months. It should help you take care of the necessities – from food to utility bills. It is also prudent to put the money in a regular bank account. Doing this will give you easy access to your reserves.
No one can predict the future. No clairvoyant gave an accurate prophecy. With that said, we can only prepare for it. We can invest in stocks or purchase insurance policies. Doing this will lessen our financial vulnerability.