I build portfolios for individuals, trusts, and retirement plans. The portfolios may hold stocks, bonds, cash, mutual funds, and exchange-traded funds (ETFs). The client’s goals, time horizon, and risk tolerance impact what the portfolio holds. Risk tolerance is how a client feels about a drop in their account. The time horizon is the length of time before the client needs the money.
Quantitative tightening (QT) is similar to what would happen if somebody who was paying your bills suddenly stopped doing so and started to reduce your bank account by the total amount of bills previously paid.
It has been a confounding year for investors. The stock market started 2020 strong, then the virus hit. At its worst in March, it was down almost 40%.
Because different countries have different currencies, overseas travel is usually more complicated than domestic travel. Likewise, overseas investing is more complicated than domestic investing. However, just as foreign travel adds diversity to your travel experiences, so foreign assets add diversification to your portfolio.
Diversification remains investors’ one free lunch. This is a good time to double-check yours, especially if you were uncomfortable with March’s downturn.
We came into this crisis with a trillion-dollar deficit and very low interest rates, challenging our ability to fight this recession with standard measures, such as government spending and central bank interest rate cuts.
Because the stock market is significantly overvalued at this time, now is an excellent time to consider rebalancing your portfolio. By rebalancing instead of selling what has gone down or buying what has gone up, investors remain diversified but go back to their original allocation. So while diversification is about the eggs, asset allocation is about the basket. What percentage of your basket is going to be in stocks and bonds?
Securities are offered through Cambridge Investment Research, Inc., a Broker-Dealer, member FINRA/SIPC. Investment advisory services are offered through Cambridge Investment Research Advisors, Inc., an SEC Registered Investment Adviser.
