STOCK markets globally are experiencing a roller-coaster ride and interest rates are rising as authorities seek to curtail inflation, while many investors are panicking.

Seniors will find their long-term investments especially vulnerable at this time. Don’t act on your fears. Be calm. The last global crisis was in 2008. Fast-forward to 2020 when the novel coronavirus pandemic created another financial crisis. Now, two years later, and the world faces another financial crisis, stemming from the war in Ukraine. Times have changed. The biggest mistake seniors and retirees can make is to sell all their shares and convert them to low-risk instruments. Share prices are low now. It’s not wise to sell when the value of shares has fallen as the temporary loss becomes permanent when shares are sold. Remember that stock markets always recover. You can’t have exponential growth without taking risks. A mindset of persistence and perseverance will take you through the crisis.

A diversification strategy is key. A percentage of all investments should be in low-risk instruments. A balanced portfolio of stocks and bonds minimises risks and grows returns that will provide a much-needed passive income in the long term. Ensure that more funds are dedicated to an emergency fund.

The closer you get to retirement liquidity becomes a priority as cash is king. Emergencies can happen at any time.

Every crisis carries with it opportunities. Investing in stocks will increase the purchasing power of your money for the future. Having all your investment in low-risk instruments will see the purchasing power of your investment eroded over time, as each dollar buys less and less as the years go by. Always remember that inflation is a silent thief and the best defence is stocks. Safeguard your future. Don’t just invest in any stocks. Buy great companies at low prices. After every downturn in the stock market, there is an upturn. Do you want to be there for the upturn?

Portfolio review

For seniors nearing retirement, it’s time to save and invest more, and spend less. Portfolios should be reviewed based on age, risk tolerance, and goals. Since no one knows where the next financial crisis lurks, it’s important to plan and make a budget. Invest with the next decade or decades in mind as the population is ageing and health costs are soaring.

Review your investment strategies. Reduce stock exposure where necessary. Mutual funds, pooled funds, and exchange-traded funds minimise risks. For the adult workers, the six months living expenses that have been often recommended may not be adequate for your emergency fund. Save more and cut back where possible on expensive vacations. For pre-retirees and retirees, at least a year’s income in an emergency fund may be appropriate for your emergency fund. Negotiate for low-interest credit cards. Clear credit card debts as they can become difficult to manage in a rising interest rate environment. In managing debt it may be more prudent to borrow against your investment if all else fails in times of crisis. The investment is earning interest and is available when the debt is paid off.

Have bonds in your investment or retirement portfolio. They are useful investment instruments in times of recession or stock market declines. For those who are near retirement, ensure that bonds are contained in your investment portfolio. Make a budget and stick to it. It’s a tool that shows where your money is going. Review your insurance coverage. Maintain good health as much as possible through dieting and exercising. Monitor home and motor vehicle expenses. Small leaks now may cost a roof later. And remember never to underestimate the value of a trusted and professional financial advisor who is trained and experienced in retirement planning.

It was Benjamin Franklin who said: “An investment in knowledge pays the best interest”.

— Grace G McLean is Financial Advisor at BPM Financial Limited. Contact her gmclean@bpmfinancial. and visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self.Email her at livingaboveself@gmail.com