How to save money in a crisis?
The easiest way to protect yourself from the fall of the market is to have enough free money in dollars or euros in case of a sharp fall in the exchange rate of the national currency; it is acceptable to store currency in the form of stablecoins.
However, the disadvantage of this arrangement is that the money at this point does not bring income, and their purchasing power is even slightly reduced due to constant inflation, which increases during periods of crisis.
Money put aside in such situations can be kept in bank deposits, savings accounts or cards with interest on the balance. For cryptocurrency, too, different tools like staking and seiving are available. We wrote about this in detail in the series about DeFi; you can find the materials at the links:
But when opening such deposits and accounts, it is essential to remember that there is an option for early withdrawal of funds without penalties and delays.
Deposits
This is the easiest but also the lowest-yielding way to save money in a crisis. Therefore, investors have decided not to simply keep funds "under the cushion" to weather the storm but invest them in certain assets, often summarised under the single name of "protective assets".
The idea is to find assets whose price does not fall or rise slightly when all other markets are distressed.
So, which assets are considered to be defensive?
Bonds
Bonds are often the least risky part of an investment portfolio. Their share in the total volume of investments depends on the market situation. Usually, it is about 40% on normal days and reaches 60 80% in a crisis or a prolonged downtrend on the market.
However, there are also risks for bonds: the issuer may go bankrupt, in which case bondholders will lose all their money.
Therefore, not all bonds should be considered as a protective asset, but only those with a severe level of protection. These are securities of the authorities of solvent countries and the largest world brands.
Gold
Despite the fact that the price of gold is much less predictable than interest on deposits and bonds, the yellow metal is traditionally considered a protective asset. Due to centuries-old traditions, in times of uncertainty and bad news, investors massively switch from any risky assets to gold, due to which its price usually rises significantly in a crisis.
Another advantage of gold is that the asset's price is determined in dollars or pounds in international markets.
However, it is worth noting that over the long term, gold's return will likely be roughly equal to inflation. It is an excellent defensive asset for crises but a poor tool for "long" investments.
In a portfolio, the share of gold is usually 10 20 per cent depending on the market phase and the depth of the fall in traditional markets.
Whatever strategy you choose in a crisis, it is essential to remember the main rule: beware of herd mentality. The main thing in a bear market is not to panic; the downtrend is simply part of the global economic cycle.
To "survive" the crisis, traders must change their behaviour accordingly. Remember, it is normal to make adjustments to your portfolio.