INVESTMENT STRATEGY

The return of volatility to the market has many investors worrying about the nest egg they have worked long and hard to build, and as the market volatility persists, some find themselves panicking and moving to cash or leaving any cash they have available on the sideline.

With that in mind, you should always carefully consider both your time horizon and risk tolerance before making drastic changes to your portfolio allocation. Simply making an emotional decision can have devastating ramifications on the long-term success of your portfolio.

If you have considered your personal circumstances and still feel as though an ultra-conservative approach is right for you, good news! What if you could invest in an instrument that has minimal principal risk, but also provides more income than the interest from your savings account?

Whether your objective is to put extra cash to work or to sidestep the current market volatility, your portfolio could be invested in an ultra-conservative basket of securities that move very little in price and have a competitive yield (ranging from 2% – 4%) to provide you with extra income.

In More Detail

There are many methods available that act like cash, but also offer interest or dividends as an added bonus. Some of the most easily accessible and familiar examples include:

Let’s take a look these investment vehicles.

Money Market Funds

These mutual funds invest in highly liquid cash and cash equivalents with high credit ratings and offer a very low level of risk. All features of a standard mutual fund apply to money market funds, except that a money market fund is typically always priced at $1 per share, where any excess above the price is distributed to investors in the form of dividends.

Certificates of Deposit

CDs often mature after a specific amount of time (six months, one year, three years, etc.) and can offer better interest rates than savings accounts or money market funds. Generally, a deposit of over $250,000 is FDIC-insured. The disadvantage is that your funds are tied up until the CD matures. If you withdraw early, you could incur penalties.

Short-Term Treasury Bills and Notes

Treasuries are considered one of the safest investments because they are backed by the U.S. government. While they are safe, they also generally yield much lower interest rates (still higher than savings accounts) and longer-term treasuries can lose their value when interest rates go up.

Ultra-Short Bond Funds

These funds can be invested in corporate bonds, municipal bonds, or other types of debt and fixed income, while typically having a maturity of less than two years. They can provide a higher yield than the other options, but can carry slightly more risk, especially with changes in interest rates.

Now What?

Many of our most conservative clients benefit from a portfolio solution that invests in an ultra-conservative basket of income securities. Depending on your time horizon and risk tolerance, this customized income strategy is built for your situation and offers yields between 2% to 4%.

This income solution is built using a mix of Treasury bonds, U.S. government securities, AAA-rated bonds, CDs, and other short term income instruments. Our investment selection centers on the industry’s leading bond managers, striving to invest in high-quality focused funds that provide stability, and consistent levels of income through varying rate environments.

Find Your Risk Number and Invest with Confidence

As always, the first step in making a shift to your portfolio allocation is ensuring the change will still align with your risk tolerance, time horizon, goals, and objectives. Your personalized Risk Number can help you become a fearless investor, preventing you from selling at the bottom and buying back in at the top. Take the five-minute questionnaire today.

Contact us with questions!