An important investment quote for this turbulent time
39 year high inflation. Stocks in the correction zone. Russia warns of military action in Ukraine Federal Reserve increases rates. Choose your poison. Financial markets are rapidly opening up and panic and fear are rife on Wall Street.
Three years after the S&P 500 gains in the 18-31% area (historically unusual), the stock market is returning to reality. The worst performing stocks in 2022 are already down nearly 90%. Here is a list.
TDH Holdings -89.42%
Astro Aerospace -88.89%
Good health – 63.41%
Gex Management -63.33%
The technology-heavy NASDAQ Composite Index fell an incredible 13.5% at the end of January – and the month is not over yet. S&P has traded 10% less for 500 years.
The consensus on Wall Street is that stock market losses can get worse before they get better – the overall S&P 500 decline extends to 20%. Are you ready for what lies ahead?
This brings us to an important quote for the time being. As the famous investor Peter Lynch put it: “Know your ownership, and why you own it“
One of the essential principles of successful investing is diversity – across unrelated assets. Gold is an unrelated asset in the equity market, a key feature that makes it so valuable to investors looking to diversify their portfolios and protect their assets.
Gold demand has already risen this week amid fears of a military confrontation between Russia and Ukraine. Historically, investors have flocked to gold during geopolitical conflicts because the yellow metal acts as a safe-haven investment and retains its value when other asset classes fall.
With inflation hovering around the 40-year high of 7%, it is easy to see the price of gold. According to State Street Global Advisors, gold has provided an average annual real return of 12.7% over the past 50 years, compared to the average negative return for both US equities and bonds, while the US CPI has exceeded 5%.
Indeed, January 25th The Wall Street Journal The article states: “An asset holding on to market volatility in early 2022: gold. Rising geopolitical tensions in Europe and a slide in major US stock indices have pushed investors toward heaven metal.”
Experts agree. The historic low liquidity is coming to an end. The Federal Reserve is going to bring back some simple monetary policies that have supported the recent rise of the stock market. As the Fed removes the easy money rage and the stock market collapses further in the face of rising inflation, investors who own gold know they will sleep better at night knowing that a portion of their assets will not disappear with the fall in equity prices.
What’s in your portfolio now? And, as the legendary investor Peter Lynch says, do you know why you own it?
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