What follows are all my opinions based on my research, reading and experience.
1. After one of the worst years for bonds ever, high-quality bonds will regain their role as the safe part of a portfolio.
2. Like 2022, diversification will once again matter. As brutal a year as 2022 was, diversification across asset types generally DID help. Value stocks dramatically outperformed Growth stocks (according to Y charts), short-term bonds outperformed long-term bonds (according to the NY Times) and non-trade real estate portfolios generally outperformed more volatile REIT stocks (according to the WSJ).
3. Like 2022, boring, long-term oriented, diversified, mostly static portfolios will again outperform innovative, trading-based, concentrated, theme-oriented portfolios.
4. Having ample liquid cash reserves – think money market, T-bills and short-term CDs – will continue to be a smart approach to meeting cash flow needs and keeping your cool in volatile markets.
5. If you fail to plan, you plan to fail. Having a “big picture” plan that incorporates both assets and liabilities, employer-based assets (stock options, 401k, RSUs, etc.), “asset location” not just asset allocation, cash management, tax awareness and estate planning, will help investors keep their focus on what really matters.
Robert F. Carrigg, Jr., CFP®
rob.carrigg@stewardpartners.com
603-427-8840
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
Asset Allocation does not assure a profit or protect against loss in declining financial markets
Bonds are subject to interest rate risk. When interest rates rise, bond prices fall; generally, the longer a bond's maturity, the more sensitive it is to this risk. Bonds may also be subject to call risk, which is the risk that the issuer will redeem the debt at its option, fully or partially, before the scheduled maturity date. The market value of debt instruments may fluctuate and proceeds from sales prior to maturity may be more or less than the amount originally invested or the maturity value due to changes in market conditions or changes in the credit quality of the issuer. Bonds are subject to the credit risk of the issuer. This is the risk that the issuer might be unable to make interest and/or principal payments on a timely basis. Bonds are also subject to reinvestment risk, which is the risk that principal and/or interest payments from a given investment may be reinvested at a lower interest rate.
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