How To Storm Proof Your Investment Portfolio

How can investors stormproof their portfolios?

The recent record breaking bout of hurricanes and the cost of the damage they have brought certainly have many investors wondering how they can recover financially, and defend their portfolios from loss in the future.

No one can 110% insulate one single investment from every potential risk, all of the time. Yet, you can protect your portfolio performance, and overall results with the right solutions and strategies.

The Threats

There are a wide variety of risks and threats to investments today. These go beyond hurricanes and floods. There are Pacific cyclones, wildfires, earthquakes, tornadoes, marketing interruptions, hacking and fraud. Some destinations may be safer than others, and experience issues far less often. Yet, no matter where you are there is probably something to look out for.

Here are four ways to protect your portfolio and its performance against hurricanes and other risks.

Diversification

Choose multiple units over larger and more expensive ones. Choose geographic diversification. While you may have pockets of investment for efficiency, having assets in varied locations can help substantially. Then ice this with strategic diversification. Build in lower risk with steady performers, more aggressive growth opportunities, short term investments, and long term investments.

Insurances

We may not love paying the premiums, but we are sure glad when we can collect. Investors shouldn’t only consider insurance when it is mandatory. Just 15% of those hit by Hurricane Harvey had flood insurance. The rest won’t be covered for water damage. Think individual asset insurance, and broader umbrella policies that cover your portfolio and its performance.

Strong Asset Management

One of the most painful lessons many newer investors are going to experience in the weeks, months, and years after these recent hurricanes is that they didn’t have the planning, teams, and relationships in place, nor the power to negotiate them. That can turn a relatively small challenge into a disaster.

Choose a strong asset management team who is experienced, prepared and able to protect, assess, repair, and facilitate claims fast.

Shared Risk

Look for investments which are overcollateralized, and weighted with more upward potential than risk. For example, look for a mortgage note, at a good enough discount or return that even if you have to do a loan mod, or allow short sale, you still profit.

There are risks associated with everything in life. The key is to recognize them, think forward, and prepare. Then you can be confident in the income and wealth creation you set out to gain in the first place.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund