Occasionally you will be confronted with major payments you need to make at a moment’s notice – house repairs and medical bills fall into this category. If you have invested your savings in the market this can prove to be a significant challenge as getting money out of stocks and bonds right away might force you to sell at a low rate. The way to get around this is by structuring your investment properly and considering the alternative of personal loans.
If you have invested your savings in equity funds and stocks you will find it very difficult to pull them out at a moment’s notice – the market may be low and you will be forced to swallow a significant loss. This is obviously less than ideal as good stock market investment often requires a long time horizon. To be prepared for this you should structure your portfolio so that it includes bonds and cash which can be liquidated at your convenience. This way you can get cash out of your account without biting the bullet.
It is also worth considering a personal loan in these instances. No one wants to go into debt, however, the interest attached to these arrangements might be less than the losses you would make by pulling out of the market at a bad time. This way you can pay off the debt gradually, and then sell off shares at a good time and get rid of the bulk of it. Loans are not the answer to every emergency, yet they certainly have their place in good financial planning.
Investing your money is the best thing you can do to ensure your future wealth and economic security. The downside to this is you are likely to have much less cash set aside for emergencies. You need to consider this reality when making your plans – so set aside part of your portfolio in easy to liquidate assets and, failing that, be prepared to take a personal loan. These provisions should allow you to negotiate emergencies, while keeping most of your money in areas that will yield great long term growth.
This is a Guest Post from M Zahid Rafiq