Strategically implementing safeguards for your portfolio can pay dividends when market volatility hits.
Downside protection strategies are those that employ defensive techniques to protect your portfolio against large losses during downturns. With a consensus towards increased market volatility in 2023, investors should consider these strategies strongly as they can benefit those who wish to preserve their capital and grow their portfolio.
Strategically implementing safeguards for your portfolio can pay dividends when market volatility hits.
Downside protection strategies are those that employ defensive techniques to protect your portfolio against large losses during downturns. With a consensus towards increased market volatility in 2023, investors should consider these strategies strongly as they can benefit those who wish to preserve their capital and grow their portfolio.
The Best Defense is a Good Offense
Investors at every level should be aware of the risk that they’re entering into with investing. By allocating cash towards an asset outside of your control, you accept the chance that you may lose that investment. How do we limit this reality? Should you take an aggressive approach during a market downturn to reap benefits during a bull market? Possibly, but knowing when to buy and sell is an inexact science. Do you invest in lower risk assets such as high-yield savings accounts, bonds and short term CDs? These are great options but may only be one piece of the puzzle. Keep this in mind as you work with your financial advisor and consider the detailed options below.
Three Strategies for Success
Defensive strategies are best employed offensively, and with a long-term view. Consider diversification through stocks, bonds and cash as a way to build a firm foundation in your portfolio over time even if volatility strikes. This is a simple and effective way to build in protection, but may have the drawback of more equity risk than simple asset breakdowns suggest.
Another option is to manage your risk through the purchase of relatively low volatility stocks. Historical data can show you which stocks have maintained an even keel over time. This doesn’t offer guarantees, but again, uses a long-term view to maintain a steady portfolio.The drawback here is that in extreme cases (loss across the board) you won't be protected.
Finally, dynamic asset allocation is a strategy that involves timing the market and moving your investments between risk averse assets in a high-risk market and growth assets during lower risk times. This strategy can be beneficial, but requires tending and goes along with an assumed risk of mistiming.
Let’s Start the Conversation
NJM Wealth Preservation Strategies was founded on principles of transparency with the goal of preserving your wealth for generations to come. With the potential for a recession higher than ever, we believe that evaluating all strategies - including hedging - can be a valuable tool to protect your wealth.
Here at NJM, our Wealth Preservation Specialist, Nicolas J McLeod, is a true Fiduciary. He serves his clients with a dedicated pursuit of their best interests.
The entire team at NJM values our foundation of legal and ethical trust with transparency and have proudly helped thousands of families across our great nation redirect their future by securing their financial well-being.
If you are interested in partnering with a firm who will build a portfolio around your best interests and goals, while focusing on eliminating risk and preserving wealth, reach out today.
Last Words
By being offensively minded in your defensive strategies you can better protect yourself and your portfolio against large negative swings.