Will Your Portfolio Survive the Next Surprise?
This WSJ article will give you a good idea as to how to implement portfolio-wide risk management strategies. It’s a short read that should give everyone considerations about asset protection. And honestly, who isn’t concerned about market corrections given the roller coaster ride of the past decade.
The author, Gregory Zuckerman, points out that sell-offs in the market are often caused by seemingly unexpected events. For instance, think of the shockwaves sent through the markets as a result of the recent uprisings in the Middle East. The threat to the world’s oil supply could potentially come with far-reaching affects to our economy.
In order to protect yourself and potentially profit from unforeseen market volatility the article mentions a few good indicators for asset allocation. Read the article here.
First of all, one advisor, Jeff Fishman, offers a good test to see exactly how much money you should have in the market compared to how much in cash or safe vehicles. He asks you to imagine the worst case scenario, which would be a 50% drop in the market across the board. Would that cause you to lose sleep at night? I’d imagine it would. If so, Jeff says that should tell you that your market exposure is too high and more of your assets should be held in cash.
The second one mentioned, diversification, is pretty much a cliché, although everyone really should know not to expose all assets to the risks of one specific strategy or investment class. As simple and widespread as that advice is, constant evaluation is necessary to make sure your portfolio is properly hedged for any market.
Finally, the article suggests options contracts as a way to profit from drops in the market that will offset other portfolio losses. It is true that strategies like this provide a way to profit nicely in volatile markets but proper use of options requires a specialized set of skills. Unless you are a seasoned market professional it would pay dividends to seek expert advice in this area.
This all leads me to a few points. Would you like to know how to get asset protection and growth at the same time?
I happen to know of some options that offer the safety of cash, fit into the portfolio diversification parameters suggested and come with the potential to profit from strong markets while protecting against weak markets.
The answer is simple and that is why so many people are moving away from the highly technical strategies that come with exposing assets to market risk. If there is an easier way, why wouldn’t you take the less complicated path?
I’d be happy to talk to you about the possibilities and address all of your concerns. Call, email or make an appointment now to add the ultimate combination of safety and growth potential to your retirement portfolio.
Bryan J. Anderson
800.438.5121 [email protected]