Personal Finance

How to protect your savings in a trade war

By August 6, 2019 No Comments

Pedestrians walk past a stock indicator board showing the share price index of the Tokyo Stock Exchange (C, top) in Tokyo on December 25, 2018. –

Jiji Press | AFP | Getty Images

Maybe you’ve listened to the personal finance experts or your financial advisor and decided not to look at your investments until the trade war headlines subside.

The problem: that may not happen for a while.

“I think this is going to go on for quite some time,” said Nick Giacoumakis, founder and president of the New England Investment & Retirement Group in North Andover, Massachusetts.

Most likely, your savings have already taken a hit. The Dow Jones Industrial Average plunged more than 750 points on Monday, while the S&P 500 dropped nearly 3%. The market recovered slightly early on Tuesday.

As the trade war between the world’s largest economies rages on, there are steps you can take to shield your money, experts say.

To begin, Giacoumakis said, investors should make sure they’re comfortable with their allocation. “If you had a position in a technology fund that was supposed to be 8% of your portfolio and, because of the run-up in technology over the past few years, that position is now a 20% holding, you’d want to trim it back,” Giacoumakis said.

Recent volatility could also pose a buying opportunity for long-term investors.

I think this is going to go on for quite some time.

Nick Giacoumakis

president, New England Investment & Retirement Group

Giacoumakis said his firm has recently added money to the real estate and health-care sectors, which he said remain relatively undervalued. People should invest like they grocery shop, he said: “If something is on sale, you stock up on it.”

Some experts said it’s a good time to look outside the country.

Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, said the bank recently cashed out between 6% and 8% of its portfolio and expects rosier returns in emerging markets.

“We think emerging markets have the highest return potential between now and the end of the year,” Wren said.

There are even exchange-traded funds aimed at investing in President Donald Trump’s trade stand-offs with other countries.

MCAM International in Charlottesville, Virginia, launched a “trade war fund” in June, said David Martin, founder and chief executive of MCAM.

The E.T.F. tracks more than 100 companies, including Adidas, Microsoft and General Electric, which could be less affected from the pain of tariffs than others.

“We’re going through reams and reams of data to find companies that historically have succeeded in getting support in the form of waivers or non-action or benefiting from government relationships,” Martin said. The fund has had an annual return of 6.2%.

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While the fund isn’t expected to turn a profit if the broader market tanks, Martin said, “the goal is not to go down as far as anyone else.”

Still others double down on a hands-off approach.

Nicholas Scheibner, a certified financial planner at Baron Financial Group in Fair Lawn, New Jersey, said he’s in favor of long-term investing in more broad index funds over other short-term strategies.

“It’s very hard to predict which companies will be hit the worst,” Scheibner said.

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