Those who follow the stock market are likely aware of the phenomenon known as “volatility,” whereby securities can fluctuate significantly from one day to the next. This constant shifting can understandably put participants on edge.
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With financial markets becoming increasingly unpredictable, Robert Kiyosaki, entrepreneur and author of “Rich Dad Poor Dad,” offered up three ways to prepare for market volatility on an episode of his show, “The Rich Dad Radio Show.”
Here’s a closer look at Kiyosaki’s advice on how you can prepare your investments for a fluctuating market.
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Educate Yourself
Kiyosaki first emphasized the importance of education, especially during uncertain times when you are vulnerable to emotional (and potentially poor) decision-making.
He also cautioned against handing over your money to a financial planner to do the work for you. Not only is another person less equipped to decide your personalized goals, but you fail to learn anything in the process.
Instead, find a mentor and don’t be afraid to make mistakes along the way. The more experience you accrue, the less emotional your financial decision-making will become.
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Positioning Through Techniques Like Hedging
According to Kiyosaki, holding a diversified portfolio of stocks, bonds and mutual funds for the long haul could be overly conventional advice. Instead, he encouraged positioning through techniques like hedging where it doesn’t matter if the market goes up or down; all that matters is your position.
This method of maximizing profits and minimizing loss relies on a context shift where the words “debt” and “market crash” aren’t necessarily bad.
Invest in Companies That You See Making Money
When it comes to investing during a period of increased market volatility, play it safe. According to guest and author, Nomi Prins, “small companies are the backbone of America,” and many have figured out how to cut out red tape and middlemen in order to actually produce cash flow.
For instance, road-building companies and concrete waste-removal companies generate profit because there are only a few companies doing this kind of work. Therefore, demand will always be high, helping ensure fluctuations will be lower.
Find companies that contribute to productive and tangible growth, and invest.
By keeping these tips from Kiyosaki in mind, you’ll be in a good position to weather the next stock market storm.
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This article originally appeared on GOBankingRates.com: Robert Kiyosaki: 3 Ways To Prepare for Market Volatility
