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Investing in a crisis | Part one

Published on 03/03/2022

As we watch the terrible events unfold in Ukraine and offer our support to those caught up in the conflict in whatever way we can, it also brings up how the markets can be affected by conflict, like the one we see happening today.

So far the conflict between Russia and Ukraine has impacted the cost and distribution of oil, and both countries' financial markets have been weakened

This is having knock-on effects globally and so here are some notes on how to think about your portfolio in the current environment.

  1. Ignore the talking heads on television. Like all news outlets, clicks and eyeballs ‘sell’, which means every opinion is “BREAKING NEWS” and in the moment can be terrifying. By all means, stay current on events, but the truth is no one knows how this is going to play out, and you will quickly fall into the trap of confirmation bias.

  2. Unless you are an expert, do not attempt the trade the current markets. Even the experienced sailor avoids the storms.

  3. If your investments are keeping you awake at night, sell them.

Most of us invest looking backwards. Seems strange to say, but it's true. We look at yesterday and extrapolate.

This can lead to problems when investing, especially as the stock market doesn't care about yesterday — its only focus is tomorrow and the day after that.

So, looking forward, here is the question you should be asking: Do YOU believe that we are on the verge of world war three? No one else, just you. If yes, then give it a probability. Are you thinking 10%? 50%? 90%?

If you believe 90%, then perhaps you need to be thinking of investing like Barton Biggs suggested: in gold, art and jewellery. You shouldn't be holding stocks at all. Let's call this the “tin-hat” strategy.

If you believe 50%, then perhaps you should probably hold 50% in the tin-hat strategy, and 50% in cash. Your cash is as close to zero risk as we can get without full tin-hat.

The majority, we suspect, are going to be in the 10% or less category, so watch out for further in-app only blogs in the coming days on things to consider if you're in this camp.

A note to end on: Sometimes the best investments are ones you may never personally see a return on. There are a number of ways we can help support those caught up in the unfolding humanitarian crisis - both financially by donating money, as well as donating clothing and bedding or writing to your local MP. This article from the BBC highlights some of the organisations offering help.

.......... Disclaimer: This blog is for information and educational purposes only. It is not intended to be investment advice and should not be relied upon by users in making (or refraining from making) any specific investment, purchase, sale or other decisions.

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