In today’s volatile financial landscape, diversification is more important than ever for investors seeking to maximize returns and minimize risk. By spreading investments across various asset classes, investors can better weather market fluctuations and protect their portfolios from potential downturns.
International Equities: A Key to Diversification
Investing internationally allows for diversification and spreading out risk beyond the home market. One option for gaining exposure to international equities is through dividend ETFs, like the iShares International Select Dividend ETF (IDV). This ETF invests in high-yield dividend stocks in non-U.S. developed markets and boasts a yield of 7.5%, helping investors beat inflation. With an expense ratio of 0.49%, IDV offers an affordable way to diversify across a range of international markets and equities, which may outperform U.S. markets in the short or long term.
Precious Metals: A Hedge Against Inflation
Investing in precious metals like gold and silver can be a way to hedge investments against inflation and further diversify a portfolio. While precious metals don’t earn dividends, they can provide peace of mind during uncertain times. One option for buying precious metals is through a gold IRA, with Augusta Precious Metals being listed as “best overall” on Money’s list of the best gold IRA companies. Augusta offers educational resources, one-on-one web sessions, and lifetime customer support, ensuring investors understand the risks and benefits of investing in precious metals.
CEF Portfolios: High Income and Broad Diversification
Closed-end funds (CEFs) can offer high income, broad diversification, and market-matching total returns if selected carefully and acquired at reasonable price points. A diversified CEF portfolio should have at least ten positions in terms of underlying asset classes. Investors should avoid chasing high yields or distributions and invest in funds with a proven history of good performance. It is important to buy CEFs when they are offered at reasonable discounts (discount to NAV) and generally avoid funds that are trading at premiums. Income investors need to make a judgment that distributions are sustainable.
Capitalizing on Market Volatility
Recent bank collapses have sent shockwaves through the financial markets, triggering drops in major bank stocks and leading to a temporary halt in the trading of several regional bank stocks. Experts say that the recent failures present an opportunity for investors to reflect and potentially look for ways to take advantage of lower valuations. Investor confidence is plummeting, with just 24% saying they are highly confident in their ability to keep up with inflation. Investing pros advise taking the emotion out of investing and being on the lookout for opportunities to invest in attractive companies whose valuations are likely to become more and more attractive.