Turn That Downturn Frown Upside Down With Safeguarded Investments

Protecting your investments from market fluctuations is the number one concern for Singaporeans young and old. While the stock markets appear to be doing well, there is no telling when things will go south. 

Your best solution? A secure investment that shields you from the vagaries of the market. 

In this article, you will learn what happens during an economic downturn, how you can safeguard your investments, and why secure investments may be your best bet for a smooth and stress-free financial future. 

Potential Economic Downturns in the Near Horizon

With financial markets and the economy humming along, what could possibly go wrong? 

Well, the global economy is showing signs of fragility. Amid numerous pressures, several risk factors suggest an economic downturn could be on the horizon. These stem from reports from the International Monetary Fund (IMF) and the Economist Intelligence Unit (EIU). 

#1 Sluggish Global Growth 

Global growth remained below pre-pandemic levels, particularly in advanced economies. While some regions saw some growth from technological investments, overall, the outlook remains mediocre, dampening optimism.

#2 Persistent Inflation in Key Sectors 

Despite broad disinflation, inflation in essential services remains high, making daily costs for households and businesses challenging. This inflationary pressure limits central banks’ ability to lower rates, keeping borrowing costs high.

#3 High Interest Rates Squeeze Spending 

Central banks’ efforts to counter inflation with high interest rates are straining economies, making borrowing expensive. This has begun to weigh on consumer spending and business investment, especially in sectors reliant on debt financing. While there are efforts to cut interest rates, notably by the US, the cost of borrowing is still high.

#4 Geopolitical Tensions and Trade Barriers 

Tensions between major economies, trade restrictions, and regional conflicts are straining global supply chains and increasing costs. These geopolitical risks are unpredictable, and any escalation could quickly affect international trade.

#5 China’s Economic Struggles 

China’s property sector troubles and slowing growth pose risks globally. As one of the world’s largest economies, economic instability in China could impact global supply chains, trade, and demand, affecting multiple sectors worldwide.

#6 Declining Consumer and Business Confidence 

With costs rising and growth slowing, consumer and business sentiment is weakening. When confidence falls, spending and investment often follow, creating a cycle that can intensify economic downturns.

#7 Rising Debt Vulnerabilities 

Both public and private sectors are dealing with elevated debt levels, making them more susceptible to economic shocks. High debt limits options for fiscal stimulus and heightens risks of defaults, especially in emerging markets.

#8 Climate Risks and Natural Disruptions 

Extreme weather and climate-related disruptions are increasingly affecting production, supply chains, and infrastructure. These events not only strain economies in vulnerable regions but also impact global trade.

#9 Technological Disruptions 

The rapid rise of technologies like AI and automation have reshaped industries, leading to shifts in job markets. While innovation boosts productivity, it will also displace jobs in a significant way, creating economic uncertainty in labour-intensive sectors.

Against such a backdrop, what can you do to reduce your exposure to economic risks?

How To Safeguard and Protect Your Investments

To better protect your hard earned funds, you need to consider taking these steps.

First, start by diversifying your portfolio. Spread your investment holdings across various asset classes—such as stocks, bonds, real estate, and commodities—to reduce exposure to any single market's volatility. Diversification helps you to mitigate the risks associated with individual sectors or assets.

Next, consider the appropriate asset allocation based on your risk tolerance, investment goals, and time horizon. Unlike younger investors for instance, older investors like pre-retirees and retirees may not have the luxury of time to wait for their investments to recover from a downturn. Regularly rebalance your portfolio to maintain the right allocation. 

Do also consider incorporating defensive investments. These are assets that tend to perform well during market downturns, such as consumer staples, utilities, and high-quality bonds. They help to provide stability and preserve your capital when markets are volatile. 

For more sophisticated investors, adopt risk management strategies like stop-loss orders to limit potential losses on individual investments. Additionally, consider hedging strategies, such as options or inverse funds, to protect against market declines. 

Regardless of the financial market performance, you should maintain adequate liquidity. Keep a portion of your portfolio in liquid assets like cash or money market funds. These allow you to cover unexpected expenses or take advantage of investment opportunities without needing to sell long-term investments at a loss.

Finally, consider parking some of your funds in real estate debt investments. These options ensure that your initial investment remains safe while providing some opportunity for growth. Although the returns may be modest, such investments offer peace of mind, making them ideal for conservative investors or those nearing retirement who prioritise safety over high returns. 

Growing Your Wealth While Minimising Risks 

What sort of investments should you be looking at to grow your wealth steadily and securely without taking on too much risk? To find the right types of financial instruments for your portfolio, consider these factors:

#1 Backed by Assets

First, consider whether your investments are secured by tangible assets, like real estate or other valuable collateral. These provide a cushion in the event of market downturns. When your invested capital is backed by solid assets, they have a layer of real-world security that can preserve your principal.

#2 Rigorous Due Diligence and Risk Assessment

Reliable investments should be thoroughly vetted. Look for platforms or products that involve expert assessments of each investment’s creditworthiness, cash flow, and stability. Such rigorous due diligence ensures that only high-quality, low-risk opportunities make it to market.

#3 Predictable Fixed Returns

Look out for consistent and reliable returns such as fixed monthly interest payments. Such regular payments provide you with a steady income stream and allow you to plan effectively. Fixed returns also help you to avoid the unpredictability of market-linked gains—this is especially valuable for risk-averse investors looking for dependable income.

#4 Multi-Layered Assurance

For greater security and safety, consider measures taken by the issuer of the investments that go beyond asset backing. These additional layers may include legal claims on the assets, personal guarantees, or buy-back provisions. Through this, they provide investors with greater peace of mind.

#5 Accessible Entry Points

To serve the mass market, your preferred investments should offer flexible entry points, allowing you to start with smaller sums and diversify. Look for options that let you invest in bite-sized amounts across multiple deals or loans. This flexibility can help you spread risk across different investments without requiring large capital upfront.

#6 Regulated by the Monetary Authority of Singapore (MAS)

Last, but most certainly not least, choose investment platforms or institutions regulated by the MAS. This adds an additional level of oversight and assurance. A licensed provider not only follows strict compliance guidelines, but also offers greater transparency and support.

Conclusion

In a volatile economy—where the stock market can skyrocket one day and plummet the next—stability is vital for safeguarding your wealth. Picking up the right investments allow you to pursue growth without exposing your principal to the risks of high market fluctuations. 

By choosing investments that are backed by tangible assets, rigorously assessed, and safeguarded with multiple layers, you can focus on long-term wealth accumulation with confidence. 

Ready to begin or expand your real estate investment journey? Consider BigFundr’s low-risk, accessible options. Sign up today to safeguard your investments and protect yourself from any economic downturns.