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The library of essays of Proakatemia

Generating Wealth in a Time of Economic Turbulence



Kirjoittanut: Emil Makkula - tiimistä SYNTRE.

Esseen tyyppi: Yksilöessee / 2 esseepistettä.
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Generating Wealth in a Time of Economic Turbulence

 

 

Economic growth is often a subject of debate. Some claim that economic growth is necessary to improve the living standards of the general public, while others believe that having too much economic growth can lead to inflation and poverty. In times of war, depression, or financial crisis, it’s difficult to know what steps to take to grow one’s wealth. However, self-reliance is a trait that should be pursued no matter what the circumstances.

In a time of war, depression, and financial crisis, it is important for individuals to remain positive and self-reliant. Instead of focusing on material wealth, it’s advisable to maintain an attitude of compassion and humility. You should also focus on improving your personal and professional skills so that you can earn an income from whatever resources you have access to. During a time of economic hardship, you should seek out education opportunities so that you can increase your earning potential and reduce your reliance on wealth generation strategies.

Economic growth can be achieved by investing in yourself. The most obvious way to grow your wealth is to develop skills that are in high demand. For example, if money is tight due to inflation, you can choose to develop practical skills such as public speaking or computer programming instead of buying expensive gadgets. It’s also a good idea to establish beneficial relationships with likeminded individuals who can help you grow your wealth. For example, team of entrepreneurs like SYNTRE osk in Proakatemia which is represents a new way of doing business and learning in teams. Joining in these kinds of teams and finding the right people around you, can help you secure new job opportunities or establish beneficial business relationships.

It’s important to maintain a sound banking system during a time of war, depression, or financial crisis. You should never keep all your money in your bank account since banks are typically unstable in times of economic hardship and inflation only eats our money if they just sit in the bank. Instead, put some money into a quality bank account with high liquidity so that you’re able to quickly access your money when necessary. You should also regularly transfer small amounts of money from your high-liquidity bank account into a more stable account for storing your valuables. Third good option is investing your money into something concrete. Everyone knows that gold holds its value relatively good during crisis but don’t forget to also look into stocks because they might really give you some good value after the crisis is over. (Western & Southern Financial Group, 2022)

Alexander Kurov talks about strategies that may protect your money in times of economic turbulence (2020) about how investing might help you during these unstable times. He made an investing checklist with seven points for long-term goal investing in crisis.

  1. Define clear, measurable and achievable investment goals. For example, your goal might be to retire in 20 years at your current standard of living for the rest of your life. Without clear goals, people often approach the path to getting there piecemeal and end up with a motley collection of investments that don’t serve their actual needs.

 

  1. Assess how much risk you can take on. This will depend on your investment horizon, job security and attitude toward risk. A good rule of thumb is if you’re nearing retirement, you should have a smaller share of risky assets in your portfolio. If you just entered the job market as a 20-something, you can take on more risk because you have time to recover from market downturns.

 

  1. Diversify your portfolio. In general, riskier assets like stocks compensate for that risk by offering higher expected returns. At the same time, safer assets such as bonds tend to go up when things are bad, but offer much lower gains. If you invest a big part of your savings in a single stock, however, you are not being compensated for the risk that the company will go bust. To eliminate these uncompensated risks, diversify your portfolio to include a wide range of asset classes, such as foreign stocks and bonds, and you’ll be in a better position to endure a downturn.

 

  1. Don’t try to pick individual stocks, identify the best-performing actively managed funds or time the market. Instead, stick to a diversified portfolio of passively managed stock and bond funds. Funds that have done well in the recent past may not continue to do so in the future.

 

  1. Look for low fees. Future returns are uncertain, but investment costs will certainly take a bite out of your portfolio. To keep costs down, invest in index funds whenever possible. These funds track broad market indices like the Standard & Poor’s 500 and tend to have very low fees yet produce higher returns than the majority of actively managed funds.

 

 

  1. Continue to make regular contributions to your investments, even during a recession. Try to set aside as much as you can afford. Many employers even match all or some of your personal retirement contributions.

 

  1. There’s one exception to my advice about standing pat. Let’s suppose your long-term plan calls for a portfolio with 50% in U.S. stocks, 25% in international stocks and 25% in bonds. After U.S. stocks have a good run, their weight in the portfolio may increase a lot. This changes the risk of your portfolio. So about once a year, rebalance your portfolio to match your long-term allocation targets. Doing so can make a big difference in performance.

 

 

It’s important to remain self-reliant during difficult economic times by focusing on improving your personal and professional skills. Maintaining a sound banking system helps you keep track of your money regardless of economic circumstances. Keeping a positive attitude will help you overcome hardship and stay strong while maintaining self-sufficiency.

 

 

 

List of references

 

Hayes, A. (2022, July 13). Investing in crisis: A high risk-high reward strategy. Retrieved December 2, 2022, from https://www.investopedia.com/articles/investing/041415/investing-crisis-high-riskhigh-reward-strategy.asp

 

How does inflation affect investments & savings? (2022, April 26). Retrieved December 2, 2022, from https://www.westernsouthern.com/learn/financial-education/the-impact-of-inflation-on-your-savings-and-investments

 

Kurov, A. (2020, March 10). These strategies may protect your money in times of economic turbulence. Retrieved December 5, 2022, from https://www.pbs.org/newshour/economy/these-strategies-may-protect-your-money-in-times-of-economic-turbulence

 

 

 

 

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