Currently, the world is experiencing a massive and unprecedented event—the strike of Coronavirus 2019 or COVID-19 pandemic. Since this disease can be transmitted through droplets whenever an infected person coughs or sneezes, the World Health Organization has implemented social distancing measures to prevent or lessen the possible transmission of the virus.
Today, universities and colleges, theatres and cinemas, and malls and parks, among others, are closed. While some businesses are continuously providing their services by enforcing a work-from-home policy to their employees, some companies and organizations are greatly affected financially by the pandemic. They have decided to cease their operations for good, which, unfortunately, left a significant percentage of the labor force unemployed.
Effects of COVID-19 pandemic to the global economy
With physical distancing strictly implemented in every part of the world, almost every operation in nearly all industries and sectors are experiencing startlingly adverse effects. According to an article published by the S&P Global on April 7, the industries that are mostly affected by COVID-19 include airlines, casinos and gaming, leisure facilities, auto parts and equipment, and oil and gas drilling.
In a research paper published by the National Bureau of Economic Research, it was found that “No previous infectious disease outbreak, including the Spanish Flu, has impacted the stock market as powerfully as the COVID-19 pandemic.” Additionally, the International Monetary Fund’s Global Financial Stability Report reveals that “the financial system has already felt a dramatic impact, and further intensification of the crisis could affect global financial stability.”
Aside from the stories about the financial markets’ crash, recently, it was reported by the New York Times that the price of oil in the United States fell below zero—a crisis that was never anticipated by anyone in the industry, not even by a global energy expert.
With these reports that have been circulating globally, how can you safeguard your wealth and assets from the drastic effects of COVID-19 pandemic? Among the many possible ways is through hedging, which is referred to as “a risk management strategy employed to offset losses in investments by taking an opposite position in a related asset.” This method doesn’t prevent negative impacts in your funds, but instead reduces the result of that adverse event.
Strategies for preserving your wealth
If you are among the folks who are looking for ways on how you can spare your funds and resources, read ahead as we’ve listed some interesting and feasible ideas for you to explore and try out!
Try investing in precious metals like gold and silver
Among the most reliable commodities for wealth preservation is gold. This precious metal, aside from the physical beauty it possesses, is deemed “precious” for a lot of reasons. One of the most notable characteristics of gold is that it has always been valuable and even considered by a lot of investors in the market as a safe haven asset. This is because this asset, throughout history, has maintained its value over the years.
Gold is commonly used to hedge against potential drawbacks in the financial market, such as the devaluation of government-issued money, inflation, and deflation. This commodity is also very popular as it is used for making various types of jewelry. In fact, some data reveals that around 50 percent of the demand for gold comes from the jewelry industry.
Apart from gold, you can also check out other popular commodities like silver. The value of this metal might not be as high as that of gold. However, its price is relatively lower. Because of this, investors can acquire and start investing in silver even with small capital. While gold is known as a volatile commodity, silver is deemed more volatile than gold. The price movements of this metal are much more notable because its market is smaller.
So, if you are eyeing to try your hand at investing in precious metals, among the investment vehicles that you can explore are gold and silver shares and gold and silver bullion. You can try checking out firms and companies that produce and distribute gold or silver and start investing in the market. You can also venture into bullion, which is deemed the most popular way to invest in precious metals. In this approach, you can decide how much gold or silver you are going to purchase, how much you are willing to sell them, and when.
Note that both these assets are volatile, so it is crucial to continually check their price alterations and the movements in the market.
Try investing in cryptocurrencies like Bitcoin
Another means of wealth preservation is through cryptocurrencies, particularly Bitcoin (BTC), which stands at the top of thousands of other virtual currencies in terms of price and market capitalization.
This dominant cryptocurrency is often correlated with gold because of some notably similar features, aside from being highly volatile:
- Mining. Like gold, bitcoin is also acquired through a process called mining. However, while gold is obtained through hard-rock extraction, BTC, on the other hand, is acquired through digital mining. In essence, it uses high-powered computers and equipment, a stable Internet connection, and a sufficient supply of electricity to run the process.
- Scarcity. Bitcoin is also a scarce resource like gold. Its pseudonymous developer Satoshi Nakamoto set its maximum supply at 21,000,000 BTC. As of the time of writing, data from Coin Market Cap states that bitcoin’s current circulating supply is at 18,341,137 BTC.
- Divisibility. Gold can be purchased in small quantities—this usually depends on the size, weight, and form. This divisibility feature is also present in BTC as 1 BTC is divisible by eight decimal places. The smallest unit is called a Satoshi (0.00000001 BTC). While gold can be divided into minimal quantities, it is still not as precise as with BTC.
These are just a few of the many similar features between BTC and gold. However, what makes bitcoin highly popular with market traders and investors is its liquidity. Bitcoin is a digital asset, which means all transactions can be done using the power of technology and the Internet. It is also easier to acquire bitcoin unlike precious metals which require all kinds of paperwork.
Bitcoin is not just a means for wealth preservation, it is also very popular as an investment opportunity. The “buy low, sell high” strategy works very well on bitcoin due to the fluctuations of bitcoin price.
Hold fast to what works best for you
While there’s no harm in trying other investment and wealth preservation options, the goal should be to preserve your funds and resources against the potential adversities in the market. As we’ve mentioned previously, both gold and silver, as well as bitcoin, are deemed as highly volatile assets.
If you have already picked the wealth preservation means that best suits your needs, be sure to always be on the lookout for any movement in the market. Make the most of your investment journey by taking this time to learn and explore more opportunities, not only about preserving, but also about growing your protected resources.