What did the COVID-19 Pandemic Really Teach Us?

Introduction : The importance of Portfolio Diversification.

Today, we will be talking about the key lesson learnt from the COVID-19 pandemic. For better or for worse, we got to admit that the pandemic had changed some parts of our lives significantly. Do you remember the last time you went out for a meal without a mask? Well, the pandemic also gave us a sense of urgency on how we prioritise and manage our assets – what if we suddenly need cash to tide us through tough times, or for an opportunity that suddenly arises?

We always hear about “Saving for a rainy day” and in 2020, that idiom turned out to be very true indeed. Moreover, the importance of not “putting all your eggs into one basket” was apparent. While the virus was ravaging through countries and inciting lockdowns, global economies were hit badly, resulting in businesses being affected and jobs being lost. Due to this, our finances were hit hard and therefore, we will naturally look to the other assets we are holding for some form of support. A lot of us go out there, get a job, buy a house, and maybe buying some stocks along the way while trying to grow our wealth. Based on this, the assets we may own will consist of Currencies, Stocks, and Property(s). The S&P500 were down by over 30% amid the pandemic and right away we face a difficult decision. Do we sell and realise losses to get the cash we need? Or do we look to sell our property(s), places that shelter us from harsh weather with a roof over our heads? Given the illiquid characteristics of properties, the whole process from finding the right buyer who fancy your house to surrendering the key to the new owner, will most likely land yourself in a situation whereby the cashflow is “stuck” due to the numerous house viewing appointments and time taken to process the transactions.

This is where Gold really starts to shimmer and shine! Gold was up by over 23% in 2020, and you could have sold some holdings to help rebalance your portfolio. For example, if you had allocated some of your savings into precious metals before 2020, as prices rallied and climbed during the pandemic, that allocation starts to take 10 – 15% more. When you sell that 10 – 15% worth of precious metals, you are still sticking to your designated allocation along with additional cash for your own use. That itself, is portfolio rebalancing. From this example, you will be able to see how Gold provides you with a smarter and better way to save for rainy days.

Being thrifty is definitely a virtue, and we are here to provide you with solutions to bring out more value from your savings.

Sin Pong