Suffered from market turbulence? Two strategies would help
[Key takeaways]
· When global stocks and bonds are falling in tandem, the conventional portfolios - a 60/40 balanced approach are in big trouble.
· Portfolio diversification and automatic investment plan may protect your money.
[What's new]
For years, some investors relied on the so-called 60/40 portfolio—60% to equities, for capital appreciation, and 40% to bonds, to potentially offer income and risk mitigation.
However, with inflation surging and interest rates rising, a rethink may be in order.
Note: The returns do not look sustainable over the next decade.
[The market insights]
Invesco recommends a 50/30/20 portfolio, split between equities, bonds and alternatives.
Buying equities and bonds is the easy part, so let's see what alternative investment means?
It includes two main types:
1. Private assets - private equity/ private credit/ infrastructure/ private real estate
2. Hedge funds - operate mainly in public markets but use less traditional tools
It includes two main types:
1. Private assets - private equity/ private credit/ infrastructure/ private real estate
2. Hedge funds - operate mainly in public markets but use less traditional tools
Diversification is also the suggestion of Pacific Investment Management Co. The company recommended shifting a portion of 60/40 portfolios into commodities to hedge against elevated inflation.
[What should retail investors do?]
While portfolio diversification might sound complicated, it needn't be.
You don't have to hand-select your investments. Mutual funds allow you to add your money to a pool of investors' money, which the investment company then uses to buy a range of assets on your behalf.
Different types of mutual funds offer different levels of portfolio diversification.
1. The balanced funds: invest in various asset classes - stocks/ bonds/ money market instruments
2. The cash management funds: mainly invest in short-term money market instruments
2. The cash management funds: mainly invest in short-term money market instruments
[Here is a smart and convenient way to resist market volatility- Automatic investment plan]
An automatic investment plan (AIP) is to invest a fixed amount of money in a fund at regular intervals.
You will buy fewer units when a fund's price is high and more units when the price is low, which achieves the desired effect of averaging costs.
AIP has another 3 features:
- Disciplined investment to avoid pursuing rises and killing falls
- Long-term investment with compound interest
- Automatic implementation and time-saving
- Disciplined investment to avoid pursuing rises and killing falls
- Long-term investment with compound interest
- Automatic implementation and time-saving
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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steady Pom pipi :
steady Pom pipi :
水樓奔月_ToTheM00N : thanks for sharing
股质增升 : Thank you for sharing .
be wealthy : good