The last few years have seen countless disruptions to the markets. From the Coronavirus pandemic to rising interest rates and inflation, we’ve seen market volatility put an end to the steady growth and stability the market once provided.
And heading deeper into 2023, there’s no telling what curveballs will be thrown our way. Here are 5 investment tips that will leave you feeling more prepared for what the markets may throw your way during the next several months.
1. Plan, Don’t Predict
Though economic forecasts are a useful tool for understanding what is going on in the investment world and what may occur, no one has a crystal ball that allows them to see exactly what time will bring. There are facts, such as the yield curve currently being inverted, new housing starts, asset values, and profit margins in decline, and the presence of signs pointing towards a cooling labor market, but making investment decisions based on what these facts could hypothetically mean for the markets to come would be unwise.
One thing the last year or two has proven is that the markets have been unpredictable. So much so that long-standing investment strategies like the 60/40 have, themselves, been called into question. This is why planning and strategizing with your investments in a way that accounts for a plethora of possibilities, as well as diversifying, rather than basing decisions solely on what is “predicted” to happen will leave you and your portfolio more protected.
2. The Danger of Speculative Assets
Cryptocurrencies and tech-related stocks have undergone hefty losses as of late, with Bitcoin and FTX at the forefront. Investors who held large portions of their portfolio in these sectors saw massive losses, a clear reminder that investments should not only be diversified, but executed strategically in a way that allows for negative scenarios to play out in a way that doesn’t devastate your net worth and financial future.
3. Beware of Recycled Sales Pitches
Following a period of market turmoil, it’s common practice to revert to strategies that may have yielded positive results during the market’s latest major decline. This strategy doesn’t always work, though, and investment decisions shouldn’t be made based on past performances alone, as this goes back to predicting the future rather than planning for it.
For example, the first part of 2022 offered great returns for those invested in commodities, but this year, the Bloomberg Commodity Index is down by nearly 10%. Commodities, TIPS, annuities, hedge funds and other investments may find a place in your portfolio, but they should all be assessed beyond their past performance before you pull the trigger on buying in.
4. Playing the Long Game through Diversification
It’s important for the core of your portfolio to be low-cost and to span global asset classes. Recently, stocks beloved by investors for their performance over the last decade such as Facebook, Netflix and Google took quite the tumble, declining well beyond the S&P 500’s 2022 losses just shy of 20%.
Those whose portfolios were heavily tied to these FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks saw heavy losses, but portfolios allocated to value stocks, stocks with dividend payouts, and stocks with low volatility saw less extreme declines.
Maintaining allocations in bonds will also assist in padding the losses of your portfolio. Though the US Bloomberg Aggregate also saw losses in 2022, their losses were about half of that of the S&P 500’s and a quarter of FAANG’s losses. The majority of asset classes saw losses in 2022, but the losses varied from major to minor, leaving diversification the most fool-proof method of reducing the risk of portfolio devastation.
5. Serious Wealth Management
Wealth management goes beyond buying and selling of portfolio assets. Wealth management is comprehensive, involving strategy, estate planning, tax-preparation, and so much more. Wealth management is the difference between winging it with your finances and taking control of your finances and financial future. To schedule a complimentary financial review with Moore’s Wealth Management, click here or call our office at 770-535-5000, where a staff-member is awaiting your call Monday through Friday, 9AM to 5PM.
Five Investment Strategies to Focus on in 2023 / Kiplinger
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Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are unmanaged and do not incur management fees, costs, or expenses. It is not possible to invest directly in an index.
Crypto Currency/Bitcoin is highly volatile, can become illiquid at any time, and is for investors with a high-risk tolerance. Investors in crypto could lose the entire value of their investment.
A bond is a fixed-income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer.