During times of rising interest rates, 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 offsetby other sectors that increase, thereby diminishing the negative impact and in turn, lowering stress levels for investors. Here are some strategies you might consider: Dividend-paying stocks: 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’trisk-free, so do your research to determine if they’re an appropriate strategy for your portfolio. Short-term debt: 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. TIPS: 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: 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. REITs: 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. Indexed annuities: 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. If you are interested about annuities and how they can help in your retirement, CLICK HERE to view my webinar with Chris Fleurat on annuities. If you would like to discuss options for diversifying your portfolio, let's have a quick chat.Schedule a time with Roxanne - CLICK HERE* Diversification seeks to reduce the volatility of a portfolio by investing in a variety of asset classes. Neither asset allocation nor diversification guarantee against market loss or greater or more consistent returns. |
Diversify Your Investments to Weather Market Turbulence
