Despite the challenging times we are living in, the stock market has hit record highs recently (as I am writing this at the end of November 2020). What can you do to protect your assets and income? Here we explore some fundamentals of good money management that help protect your assets while maximizing growth opportunities.
We all know that it is a good practice to diversify your investments across asset class, across geographical global regions and across industries. If you are already doing this, then kudos to you. Keep doing this and rebalance your asset allocation from time to time so that you benefit from the market's ups and downs over the long term.
It's not such a great idea to put all your eggs in the same basket. Isn't it?
What else can you do?
For those of you who own a principal residence or rental real estate properties, I recommend aiming to have about 50% of your total net worth in real estate over the long term. You could be off this percentage for a period of time due to life changes or whatnot, however, it is a good principle to aim at this percentage. Why? Well, because you really do not want to put all your eggs in the same basket. It is about protecting your net worth. I am confident real estate prices will continue to go up in Canada. We have a lot going for us, including the commitment of our government to bring in 1.2 million new immigrants over the next three years. This, among other factors, favours a strong real estate market in Canada over the long term. However, I still caution against investing too much in real estate as there is always a risk that the specific property you own does not do so well, even if the overall market is doing well.
Invest in yourself
The best advice I can give to protect from financial downfall is to invest in yourself. We have heard the old adage that "money cannot buy happiness." Despite all the precautions, there will be times when the rug might be pulled from underneath you and the fall is inevitable. Then, what would you do?
If you have already invested in yourself, especially in what you believe, then you can sustain any blow that this passage of time on this earth may bring you. So, invest in your mental, physical and spiritual well-being, and you will have faith in your financial well-being too, no matter what life throws at you.