Yesterday, I wrote about Key Financial Warning Alarms and today I’m going to tell you some of the things I’ve been doing.
Liquidity Protection
- Having 3-6 months of cash outside banks to handle ongoing expenses (food, utilities, gas, medical, etc). I also keep money in many different bank accounts in case an account is frozen or inaccessible.
- Keep less than FDIC amounts in bank accounts. The limit is $250,000 per individual account holders. SIPC has a $500,000 limit per account as well. It’s one of the reasons I keep money in multiple brokerage accounts.
- Rotate portfolio to cash/bonds. I wrote about moving from IWM to TLT not that long ago and that was before the Iran war began. I also wrote about increasing cash position to $250k.
- Short positions – I have defensive puts and sold calls on key holdings as a hedge to limit losses during corrections.
- I hold energy positions and was fortunate to be holding those when all this war chaos began but I also had anticipated this war especially with the huge volatility in tickers like XOP.
- Ditch tech stocks – I had already limited my exposure to QQQ largely due to AI taking over the world but a financial crisis will also hammer tech stocks.
- Long bonds – I’ve already written about TLT, municipal bonds, and other bond holdings in my portfolio.
- I will add that I have purchased foreign currency as a hedge in addition to the above.
What Should You Do?
I have no idea, you and I don’t have the financial intimacy needed to give you any kind of advice but I do know that you should do something. What that something is will depend entirely on what is the most important to you in your current financial situation. Pretending that nothing is happening or simply hoping for the best is a really bad strategy that will likely lead to disappointment.
At a bare minimum, you may want to cut discretionary expenses, save additional cash, skip spring break, work a gig job if you lack funds. If you have some degree of wealth then some of the things on my list may be options for you but that’s up for you to decide.
Share The Wealth
Are you hoping for the best as your plan or planning for the worst but hoping for the best?