The ideal investment strategy for 2014 is surely an investment strategy tailored for reducing portfolio risk through better asset allocation and diversification throughout the asset classes. Profit Method, If things turn ugly, the year 2014 promises an increase in risk and uncertainty… so here we focus on the average investor’s best investment strategy and best asset allocation for investing money to stay out of financial trouble.
Asset allocation, defined: when investing money, in and where what proportion you invest money over the various asset classes. As an example, you might invest 60% in stock funds and 40% in bond funds. Profit Method, This easy asset allocation has worked quite well more than thirty years and lots of professionals still recommend it as a the best investment technique for the normal investor. Losses in stock funds have often been offset by gains in bond vise and funds versa. In 2014 and beyond, this may not be the best way to invest money.
We could be entering a new economic environment that couple of today’s investors have an understanding of, and fewer yet understand. Many are not aware of the risks involved with investing money in bond funds, Profit Method, though today’s investors understand that stocks funds can be risky. If unemployment remains high in a slow-growth interest and economy rates rise significantly, both can be losers. That’s exactly what the USA may be facing in 2014, so listed below are my suggestions for how you can protect yourself and ways to invest money with the best investment strategy moving forward.
We’ll begin with the best investment technique for bond funds. Profit Method, Many investors today, especially older folks, consider their bond funds to be their finest investment. All things considered, bond funds have basically been good solid performers since 1981 (when interest rates peaked at double digits). When our government quits forcing interest levels down toward record lows (using quantitative easing), rates could rise significantly and send bond prices and bond funds DOWN in value. Profit Method, That’s the way the bond bond and market funds work.
If your present portfolio asset allocation is allocated 40% or more to bond funds, consider cutting your exposure here to about 30%. Exchange any long term bond funds (people that have average maturities of 10 years or higher) maybe you have for intermediate-term funds with average maturities even closer to about 7 years. Profit Method, Investors holding the latter may take losses when rates of interest rise significantly – but folks investing money in long-term funds can get HEAVY losses.
Your best investment technique for diversified Usa stock funds: an asset allocation of below 50% of total investment assets. The typical stock fund has returned more than 100% before 4 to 5 years. Profit Method, If you missed out, investing money here now is probably not the best strategy. I would personally also favor stock funds that hold premium quality, large-cap stocks with a dividend yield of 2% or maybe more. Now is not some time to obtain aggressive.
So, Profit Method, where do you invest the rest of your money? There are two other asset classes to think about: CASH (safe, liquid money), and ALTERNATIVE INVESTMENTS (like gold, property, and natural resources like oil). Whenever you have high uncertainty when both bonds and stocks are pricey, money is king. Investing a few bucks for safety in a nutshell-term CDs, insured savings accounts, T-bills or money market funds makes good sense as part of your investment strategy. You may also would like to invest money in specialty stock funds that invest by specializing in sectors like gold, property, or natural resources.
In simplest terms, Profit Method, the most effective investment technique for 2014 is broad diversification with your asset allocation… with less emphasis on bond funds and diversified stock funds.