How to Protect your Money in a Pullback


 
 
08:59 09/04/2018

If there’s one person that knows how to weather a financial storm well, it’s the Oracle of Omaha, Warren Buffett.

So what’s his trick?

Have Cash on Hand

“Cash, though, is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent,” he says.

Don’t Follow the Herd

One of the key reasons that many investors underperform in the market is because they move in and out of assets at the wrong time. When an investor sees everyone else making money from rising markets, that's when they tend to throw every spare dollar into their investments. Unfortunately, when that same investor sees a group of other investors selling, the investor sells, too.

In short, they get caught up in herd mentality.

A trader will often mimic the actions of a larger group so they don't feel left out of a trend, or miss what the herd believes is a “can’t lose” trade.

The rationale is simple.

It’s unlikely that such a large group of people can be so wrong.

Be in a Strong Position to Capitalize

With cash on hand, Buffett has the financial flexibility to jump on opportunities that popped up. As the billionaire often points out, keeping some cash on hand allows you to take advantage of corrections without having to sell other investments.


This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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