While treasurers and finance leaders in the global community have struggled like never before, cash investment fundamentals remain the same; security, liquidity, and risk management. At a time when so many issues seem risky, going back to the basics may also bring about greater expectations and confidence in the ability of treasurers to effectively deal with the new occurrences that may occur.
These fluctuations continue to be and will be a boon on Wall Street, where an easily accessible, educational, and constantly updated cataloguing of financial positions provides a continual guide to the inner workings of the marketplace. Boom-and-bust market cycles have existed since financial institutions began keeping records. They often go into excess, followed by a period of correction until they attain more equilibrium.
We must safeguard our financial future even during depreciated periods and booming times.
First, let’s look at what history has shown us: that the up-and-down cycles of the stock market aren’t out of the ordinary, the long-term historical return on equities is positive, and historical stock returns consistently exceed inflation. We can’t control how the stock markets work; we can control how we design for and manage our financial strategies to protect us from unnecessary risk and ourselves in the form of emotions.
The first thing to do is cease your mistakes and start working on reinforcing your strengths. Here are the things to think about:
Stick With Your Plan
For any investment plan that has an appropriate stock market, is diversified, and has a turnaround time matching your risk tolerance and long-term goals, the standard suggestion is typically to hold steady. Do not allow worry to produce apprehension, which can then lead to panic. Selling equity to avoid additional paper loss may be tempting, but it gives emotional control over the investment strategy.
Setting up a downward spiral is straightforward. For example, when is the best time to invest in equities once a flight to cash realizes itself? History indicates that recoveries occur in short bouts.
The most-recent market revival took place in March−to−December 2009. Unfortunately, those who pay attention to every closing date are not as well-suited to returning to the market as others who recognize that it does not matter when the actual entry exists. Consequently, such people have missed much of the recovery en route.
Similarly, making investment decisions that you’d regret when the market is performing well is risky. Not a great idea either!
That said, managing cash flow properly during turbulent and volatile times is all the more critical. So, protect your cash and manage your money wisely.
Continue Regular Contributions
If you are near the last stage of your financial life, regularly contribute to your 401(k), IRA, Roth IRA, and other investment accounts. Save your money for when financial markets are in panic mode. Low stock prices mean that each contribution dollar gets you more stocks.
Saving a fixed amount of money over varying periods with this method is known as dollar cost averaging. With it, your actual long-term price per share drops below the average price per share. Yes, so that’s double-talk. Nevertheless, the numbers work that way if you do the math carefully.
Managing liquidity is a fundamental part of cash management. Do so wisely and carefully.
Periodically Rebalance Your Total Portfolio
Over the years, revenue from various asset classes in your portfolio can drift from their target percentages. This is because a regular rebalancing process, such as annual rebalancing, will shift money from asset classes that have overperformed (on a relative basis) to those that underperformed.
Another great way to allocate your portfolio to reflect your desired allocation is to buy low and sell high. Again, this method safeguards your budget.
This is an example of an optimal investment strategy, with an open portfolio allocation concerning its risk level that purchasers remain constant as their stocks remain buoyant and stable.
Review Other Vital Aspects of Your Financial Picture
Achieving and maintaining a healthy financial picture involves much more than savings and investments. Other essential parts include:
- cash flow management,
- tax planning,
- investment strategies for helping grandchildren pay for college,
- choosing a medical plan that gives you the best benefits at the most reasonable price,
- plus making plans for long-term care
- ensuring that the relevant estate planning documents are in place to help you prepare for this inevitability
If you’re not yet collecting Social Security benefits, choosing the right moment to start can significantly affect your household’s finances.
Set up an e-commerce store on your web page so customers can order products and send payments electronically. It will enable you to quickly assess how much product is needed and thereby reduce waste. In short, entirely automate whenever possible.
Get Social (Online)
Sites like Facebook, Instagram, Twitter and LinkedIn can help you interact with current and prospective customers. Don’t forget to participate in conversations by monitoring questions and comments actively. Understanding social media etiquette sets a positive tone and can build trust and brand loyalty, leading to future sales.
Use Financial Management Tools
Financial Management tools and software such as MoolahMore can be incredibly advantageous to your business during turbulent times. MoolahMore is intelligent, fully automated and can create forecasts and analyze cash situations.
Cash Management and managing liquidity properly are the keys to keeping your cash secure during turbulent times. We hope this blog has helped you get ideas on protecting your cash and keeping it flowing!
MoolahMore is also available on iOS and Android! Request a demo today and sign up for a 30-day free trial to start seeing improvements in your cash flow management. Do more with MoolahMore!