Since February 24, Russia has invaded Ukraine, and a war has begun that will have consequences on the population but also on your money.
For several days I have been answering dozens of phone calls from my customers, which I can summarize into two categories:
What will happen to my savings?
What to do in the next few days?
If you want to find out the answers to these questions, keep reading the post. The theme is complex, but I try to bring order.
The opening of a new war scenario, the international consequences of which could further extend or, in any case, continue for some time, has once again put the world of investments on alert.
The geopolitical scenario is uncertain and risky.
As always, however, past history can be an example to understand the evolutions of the near future.
Since 2008 we have seen the mortgage crisis in America, then there was 9/11, and more recently, the biggest health crisis in the modern world.
Despite the history and statistics, your problem is that now you will surely see the value of your investments drop.
In situations like these, we must pay attention to two typical feelings of us human beings: fear and greed.
We must not run away from investments for fear of losing, and we must not be unscrupulous in seeking at all costs the opportunities that arise from a market downturn.
Worse still, getting caught up in hyperactivity, that is, necessarily feeling obliged to do something, to react in some way.
The logic that governs investments is always a balance between protection and opportunity.
This means that in every investment, such as those that have characterized my activity as an att insurance consultant for years, there must always be mechanisms that respond to the volatility and tension in the markets.
After protection, there may be room for opportunity.
I say this often and repeat it even now: the yield also derives from the variability of the markets.
The 3 tips to protect your money in wartime.
The only way to bring home a positive result is to look at the right time horizon, which is certainly not the short term.
It is obvious that in a situation like the one we are experiencing, our endurance skills are severely tested.
We are human, we have emotions, and we often behave irrationally.
For this very reason, here are 3 personal finance tips to protect your investments.
SALE NERVES: no one has a magic wand, but surely the worst solution is to make decisions driven by irrational behavior. So calm and cool.
TIME HORIZON: time will do its job of neutralizing volatility and making your investment efficient.
DIVERSIFICATION: Not keeping all your eggs in one basket is the best way to navigate the stormy waters of the markets.
When there is a storm, those on the ship wonder if it is better to stay safe in the harbor.
Translated, it means that you may think that it is always better to choose the old “guaranteed capital” solutions.
Sure, you’d better life this moment feeling like you’re in an iron barrel, but when the storm passes (because it will pass!) You will have to deal with inflation, which will very quickly demolish your purchasing power.
We are all emotionally involved and for this reason, speaking clearly about what is happening seems to be the only way to do my job to help you be more and more aware of the choices concerning your money.
Of course, I don’t have a crystal ball, but it seems normal to me to share what I know to strengthen the relationship of trust built over time.
Advice based on your current investment.
What to do if I have invested in the stock market?
Better gold or bonds?
To these and other questions, I want to give some indications in order to better understand what impact the war scenarios will have based on how you have invested your money.
Money is deposited into the account.
The war scenario we are experiencing can trigger irrational behaviors dictated precisely by the uncertainty of the future.
A new uncertainty, different from those experienced in past crises.
In this case, one can go beyond the usual doubt as to whether, where, how to invest, or, more simply, whether to disinvest and transform everything into liquidity.
However, in this uncertain scenario, there is one point: your money in the bank is safe.
The only real risk, as I have said several times, is that of inflation.
That said, the golden rule of diversifying your liquidity always applies, even in a difficult time like this.
Investments in the stock market.
Global uncertainty prevails in the financial markets: from the unknowns on the effects of the rise in the price of raw materials and the withdrawal of monetary stimuli from central banks to total uncertainty about the developments of the war in Ukraine.
If you have a portfolio made right for your long-term needs, you don’t need to panic. Cybersecurity, alternative energy, and defense are the sectors that are benefiting from the war events.
Investments in bonds.
The rebound in bonds is a paradoxical effect of war: every conflict drives inflation up but pushes investors towards the hardest hit financials.
Five days after the Russian invasion of Ukraine, purchases of Bund, the government issue of reference in the Euro Area, pushed the yield down (-0.091%).
A few sessions earlier, in view of the rise in prices and the post-Covid economic recovery, the yield on the German government bond had re-emerged above zero (up to over 0.2%) after two years of pandemic pressure.
Even more violent, moreover, was the coverage of short and medium-term bonds, which were more linked to current events and short-term events.
In part, the return of traders on bonds is also the result of the flight from equities.
Corporate bonds give a yield premium, but it is important to select those of high quality and solid issuers, who do not have debt problems, therefore the senior and not the subordinated ones.
Among the emerging bonds, which also give a premium, those of Eastern countries are clearly to be avoided, while the Chinese ones could have a good time, thanks to the theme of raw materials.
Investments in Emerging Countries.
The blocking of the Moscow Stock Exchange starting last Monday has had heavy repercussions on financial instruments linked to this index.
That said, even if the Moscow Stock Exchange were to reopen, it is conceivable that the fate of the Russian financial market would be heavily influenced by the latest developments.
Russia weighs around 3% of the MSCI Emerging Index, and the fallout has been limited.
As far as emerging countries are concerned, however, a distinction must be made, as the scenario is not homogeneous.
While South American countries may suffer more, Asian countries such as Korea, Taiwan and India should perform better.
China, after the disappointments of 2021 on the equity front, could do better this year.
Investire in cybersecurity.
The war between Russia and Ukraine is waged with bombs and tanks, even on the computer network.
The reference is to the numerous cyber attacks that have hit government sites in Kyiv in recent weeks.
But there was also the Anonymus hacker offensive against Russian sites.
The topic of cybersecurity is on the agenda of governments, companies, and investors.
Cybersecurity is certainly a very interesting and expanding sector.
Incidentally, there is a great shortage of specialized personnel right now.
It is, therefore, an opportunity for specialized companies that have enormous room to grow.
And it is also an opportunity for investors.
Investments in Gold.
Gold returns to its splendor, which with uncertainty and the fall in real interest rates (i.e., net of inflation), becomes the safe-haven asset par excellence.
In recent days, the yellow metal has touched $ 2,000, close to the historic peak reached during the pandemic.
It is an element of investment protection and acts as a buffer against the volatility of equities.