Suze Orman says the volatility in the stock market is not over. Take this one step for your safety

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Investors should be prepared for higher upside.

Key Points The stock market is down significantly since the start of the year, and the worst isn’t over yet. A good way to protect your cash reserves from permanent losses in your portfolio.

If checking your brokerage account these days makes you want to scream, cry, or curl up in a fetal position while angry music plays, you’re in good company. The stock market is down significantly since the start of the year, and many people are seeing losses on-screen in their portfolios.

Now, this is not the first time the stock market has gone through a rough patch. But the problem is we don’t know when the stock will recover.

In a recent podcast, Suge Orman said that the volatility in the stock market is not over, and it could take a long time for portfolio values ​​to recover. In light of this, Orman thinks that investors should do what they can to avoid incurring unnecessary losses on their investments. And an important step could be your ticket to ride things.

increase your savings

Orman strongly believes in having enough cash reserves when it is ready. In fact, she takes a fairly aggressive approach to building an emergency fund.

Many financial experts will tell you that having enough money in your savings account to cover three to six months of living expenses is a good bet. But Orman says an emergency fund with eight to 12 months of expenses is more appropriate given factors like inflation and the potential for recession these days. And having extra money in savings can help you get through periods of unemployment – ​​it can also save you from taking losses in your brokerage account.

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Of course, you may feel that eight to 12 months’ worth of bills is a lot of money to tie up in cash. And for you, it could be. But if you only have an emergency fund of three months, it may be time to focus on growing your cash reserves.

Let’s say you lose your job and exhaust your emergency fund after three months. If you are still not profitably employed at that point, you may need to begin liquidating stock to free up cash to be used to cover bills. But if your portfolio is still down at that point, it could mean losing money.

On the other hand, a boosted emergency fund can buy you a few more months to stick your investments while looking for a job. And it can save you from locking in a permanent loss and instead gives you the option of waiting for your portfolio to recover.

solid advice all around

Investing is a great way to grow long-term wealth. But to make sure your short-term needs are met, you can set yourself up to invest with more confidence and avoid pitfalls. As such, it’s a good idea to take Orman’s advice and grow your savings now. It could be months or years until the stock market recovers the price it lost this year, and you want the option to go with the flow to the greatest degree possible.

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