During times of rising interest rates, crashing cryptocurrencies, high inflation, and bear market growliness, a fully diversified portfolio can help lessen the impact of volatile conditions. A diversified portfolio weaves together a range of strategies from different industries, paired with products from varied sectors, classes or risk ratings.
The intent is that when some sectors decline, they’re offset by other sectors that increase, thereby diminishing the negative impact and in turn, lowering stress levels for investors.
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Strategies You Might Consider:
In addition to providing consistent income, many dividend-paying stocks are in sectors that can more easily withstand economic downturns. They provide the dual benefit of potential stock price appreciation coupled with dividend payments -- a good recipe for outperforming inflation over time. Dividend-paying stocks aren’t risk-free, so do your research to determine if they’re an appropriate strategy for your portfolio.
Bonds such as Treasury Bills have an inverse correlation to the stock market and tend to rise in price as stock prices fall. In addition, because the U.S. government backs them, Treasury securities are considered a safer investment relative to stocks.
Treasury Inflation-Protected Securities (TIPS) are indexed to inflation and are paid out twice a year at a fixed rate. TIPS come in three maturities: five-year, ten-year, and 30-year.
Precious metals (purchased directly or through exchange-traded funds) have potential to produce positive returns during prolonged bear markets because they hold their value and offer a hedge against inflation.
Real Estate Investment Trusts (REITs) consist of real estate assets that typically produce income at different times, and must distribute 90% of their taxable income as dividends to investors. REITs develop and improve their properties and reinvest in other properties to produce returns.
An annuity is a contract with an insurance company that provides an income stream during retirement. Indexed annuity returns are based on an index like the S&P 500. If the value of the index goes up, you receive a return based on that value. If the value of the index goes down, you receive a guaranteed minimum interest rate. Other things to know about indexed annuities:
Your financial professional should work closely with you to determine if any of these strategies are appropriate for your situation (or if now is a suitable time to diversify your portfolio as you work towards your goals).
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Our Complimentary Second-Opinion Portfolio Review can help assess if you’re on the right track.
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Fixed Annuities are products of the insurance industry and are designed for long-term retirement investing. Annuity guarantees are subject to the claims-paying ability of the insurance company. Surrender charges may apply if money is withdrawn before the end of the contract. All withdrawals of tax-deferred earnings are subject to current income tax, and, if made prior to age 59½, may also be subject to a 10% federal income tax penalty. Annuities generally contain fees and charges which include, but are not limited to, sales and surrender charges. Additionally, if purchased within a qualified plan, an annuity will provide no further tax deferral features. The contract, when redeemed, may be worth more or less than the total amount invested.
There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
Crashing Crypto and Diversification
November 15, 2022