Stock investing for dummies
Out of the gate, 2016 is already setting itself up to be an extremely volatile and unpredictable year as far as the markets go. There are a lot of things attributing to this: the election year, China growth concerns, increased terror activities, possible Fed interest rate hikes, oil speculation, etc.
For an investor, these global “issues” can surely cause confusion as to where to allocate your investments for the coming year. While I am the last person to suggest that we panic and convert all of our savings into cash, and try to time the market, I do believe that having a prudent approach to investing should remain the focus. Since the market rollercoaster makes selling at the top and buying at the bottom nearly impossible, a sound investment strategy should make the ride a bit smoother. Since nobody knows for certain where the winners and losers are going to come from, and since we are in a global economy, we have always built our clients a globally diversified portfolio which takes advantage of all asset classes.
Most investors think a well diversified portfolio consists of US stocks, US bonds and some sector funds. What about exposure to foreign equities, foreign fixed income instruments, commodities and metals, hybrids like convertible debt and preferred stock, emerging markets, etc? What’s interesting, if you look at the Callan Periodic Table of Investments, which illustrates the annual returns of various asset classes over the last 10 years, you can see that timing the market – let alone the global asset classes – is nearly impossible and spreading your wealth across all assets classes is a better long-term approach.
Nowadays, taking part in a globally diversified portfolio is easier than ever before. Certainly you may want to sit down with a financial advisor and calculate the right mix based on your time horizons, risk tolerance and objectives, but Exchange Traded Funds (ETF’s) may be a great cost-effective way to start. A globally diversified portfolio should improve overall investment returns over time while helping to manage and reduce portfolio risk.
You can learn more about Richard Zeitz here.
– stock investing for dummies