How To Protect Your Investments In This Roller-Coaster Economy

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When I was a kid, the idea of investing in anything other than a statement savings account was completely foreign to me. My parents worked in low-paying jobs and never had much leftover after all of the bills were paid. Then, I got a little older and I started meeting different people. Those people expanded my horizons into thinking bigger. Nowadays, I’m investing as much money as possible to build financial security for my family. If you’re in the same boat, let’s take a closer look at how you can protect your investments for your family.

Lucky for me, I found The Motley Fool in my 20s and was completely blown away. It was the first time I started to understand exactly what real investments were. From there, I read and listened to everything I could about investments and building wealth.

Some of my favorites included:

And with that, a wealth-building fire was lit inside of me. That’s not to say I didn’t make plenty of financial mistakes while that fire was burning. Oh, I did. But, I’ve learned from them. These days, Mr. MMM and I are firmly committed to building massive wealth through our investments.

Not surprisingly, if there’s one thing I learned from reading and listening to all of those financial books is that diversification is key. And, in this roller coaster economy – or any economy for that matter – you’re going to want to protect your investments. So with that, let’s take a closer look at some diversification options out there.

Keep Saving

Pets - protect your investments

Diversification ensures we’ll always have money to feed our Mad Money Pets. Very important.

Any investor knows that it’s important to have savings. Fast cash is essential if you experience a job loss or a downturn in the economy. The last thing you want is to have to tap your investments because you don’t have enough cash available in a high-interest savings product or account.

Even if you prefer hiding money under your mattress (not recommended due to theft and fire) over a high-interest savings account, it’s still a step up from having every last dollar invested and not easily accessible. 

Note: If you are going to keep a substantial amount of money at home, use a fire-proof safe that can’t be easily removed from the house. Bolt it down to the floor. Oh, and don’t tell anyone about it! 

Protect Your Investments Via Diversification

Assuming you have a healthy stash of cash somewhere, you’re likely going to be focused on investing additional money. And when you’re at the point of having investments, you need to protect them.

A diverse portfolio helps to protect your investments from several unexpected misfortunes. Personally, we like having investments with different levels of risk, as opposed to only having high-risk investments. But that’s just our style. You need to find your own.

It’s often advised to invest in different industries so you won’t be hit as hard if one of them takes a nosedive in an economic downturn. Our style is to invest in broad market low-cost index funds. This is a simple investment style and it keeps us diversified at the same time.

We’re certainly not financial experts, so picking individual stocks or industries is out for us. Our philosophy is to only invest in products we fully understand. It’s so much easier that way.

International Investments

Nissan - protect your investments

Cars are terrible investments. We just sold this one to make way for Van Life. WooHoo!

While global economic events can occur, each country generally has a separate economy that, although linked to one another, is more influenced by internal factors than external ones.

If you’re thinking about how to protect your investments from a crisis economy, considering investments in other countries could be an option.

If you do choose to make international investments, you’re also going to need to keep an eye on that economy to make sure your investments are safe. Many people choose to invest in certain currencies that seem to offer more stability than others at certain times. So, if you happen to understand foreign economies, and it feels like it’s a good fit for you, it’s worth a consideration. 

Invest in Essential Products – Defensive Stocks

Even when the economy is in a downturn, there are still essential things that people need. People will always spend their money on food, toilet paper, utilities, etc. That is guaranteed.

These investments fall under the realm of defensive stocks, which perform well, no matter the state of the economy. Defensive stocks can play an important role in diversifying investments. They can also help when the economy is weaker or highly volatile. 

And this is, yet again, another reason we love our broad market index funds investment style. Investing in the total stock market means we get all of the stocks in all of the industries – including the defensive ones!

Invest In Physical Assets

Many investors decide to invest in physical assets that might hold their value in an economic downturn. Think gold and silver. Investing in the precious metal markets is often a popular choice for people who want physical assets they can hold in their hands.

Plus, it’s cool to have a shiny piece of metal that you can trot out and flash around when you’re hosting a dinner party. They also make great gifts!

Invest In Real Estate

rental house - protect your investments

Our first of, hopefully, many rental properties. So far so good.

Real estate also counts as a physical, tangible asset. It’s one of the things that many experts recommend investing in if you want to protect your finances against economic collapse.

Having real estate is like having a small business that pays you money every month. Instead of providing you with dividends, real estate provides you with rent. Do it right, and your rent should far exceed your expenses and ensure a monthly guaranteed income.

We do love our real estate. Currently, we have one rental property and plan to purchase more in the future. This is another investment option that we understand! And because we understand it, we invest in it. It’s proven to be a great diversification tool for us.

But make no mistake, it is a business and it takes time. Even with a property manager, you’re still going to be involved in making decisions. So be prepared. 



I’ve noticed a lot of buzz these days about cryptocurrencies being the answer to economic uncertainty. The primary digital currency that people have heard about is Bitcoin, but there are a number of other ones, too.

There’s much debate over whether cryptocurrencies are really a worthwhile investment, but it’s certainly true that some people have managed to make money from them.

If you’re thinking about investing in cryptocurrencies, you need to do plenty of research to see if it’s the right decision. For us, as of right now, we don’t understand it. And you know what that means. 

See also:

Start A Company

Mad Money Cat - protect your investments

Mad Money Cat has mad investments. #diversifiedkitty

If an economic downturn does arrive, you might want to think about whether or not it’s the right time to start a company. Ironically, some of the biggest companies today were started in the aftermath of an economic crisis. Want an example? Here ya go… Airbnb picked up on people’s desire to rent out spare rooms in their homes to make some extra money. And just like that, a star was born.

Fortunately for most people, there are many other ways to make money in a depressed economy without starting a full-fledged business. You might have a useful skill that would be beneficial to a lot of people with not a lot of money.

So, take inventory of what you have to offer and never underestimate the financial opportunities of a successful side hustle

It’s difficult to predict the future because, no one, despite what they tell you, has any idea what the market is going to do. One thing is for sure though, if you’re making investments, diversify. This is your best hedge against any roller-coaster economy. Enjoy the ride!

How do you protect your investments against volatile markets? Do you take a more active approach? We’d love to hear about it in the comments!

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