Following the long-drawn COVID-19 pandemic, and the emergence of recent geopolitical crises, the stock market seems to be heading towards an unfavourable future. It can be unnerving to investors to see their holdings dip and stay low in a volatile market.
However, investors can choose to embrace the cheaper stocks (which is also known as hold and wait), and whilst doing so, extract some value from them through Securities-Backed Financing – the pledging of your holdings for a loan.
“Cash not enough”
Liquidating your holdings to fund planned or unplanned life events, such as weddings or medical expenses, should not be your only option. Instead, you can consider pledging your stocks or unit trusts for a loan.
You are essentially getting the best bang for your buck. Apart from the cash you receive, your pledged collateral continues to be invested, while you benefit from potential upsides and dividends.
By not liquidating your holdings, you will be able to plan better and meet your longer term investment objectives.
Buying more, buying low
With cash on hand, you have the freedom to acquire more of your preferred assets when the opportunity arises.
When the prices of securities are low, you can accumulate more of it to broaden and diversify your investments to lower your overall risk. By buying at a lower price, you are also reducing the total average cost of your holdings over time.
History has shown that markets do recover and making the right decisions can yield very good results. Accumulating more good investments will potentially increase your long-term returns.
Moreover, if the stocks or unit trusts you chose to buy pay dividends or have regular pay-outs, these can assist in offsetting the cost of borrowing.
Embrace the lows and profit
In conclusion, borrowing against your holdings can provide you with the assurance and flexibility especially in times of need. In these uncertain times, it is perhaps best not to liquidate your investments but to stay invested.
It is also important to note that all investments come with their own risks. One should always proceed with caution or seek professional advice.
Do reach out to us if you have any enquiries or if you are looking for any financing solutions.
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