Investors, financial planners and finance managers alike have predicted that the basic investment strategy for the year 2010 is going to be a little different than previous years. While the recommendations for most people would usually be 60% stocks and 40% bonds, this is because stock funds are viewed as growth element and the bonds are viewed as the safer investments which lead to higher income. As this year is going to be a little unusual, how can one review and re-structure their asset allocation?
Despite the fact that aggressive investment at times can lead to higher profits or high defenses can lead to lower risks, it is time for investors to lighten up and diversifies their asset classes for their long term benefits. The reason is because of the fast changing markets which would cause the investment landscape to change considerably. Thus, it is wise for investors to lower the risks of their asset allocations or to maintain their asset allocations at acceptable level of risks.
To avoid heavy losses, one can consider cutting their exposures and shortening their maturities if they hold bonds or bond funds. They can shift their bond funds to another category such as intermediate-term or short-term bond funds. Although investors might sacrifice higher interest income, they will increase their level of securities with this strategy. On the other hand, in terms of stock or stock funds, investors should consider stocks that closely follow the market in general unless they opt to speculate. The reason is because of the instability of the stocks and stock funds as well as the "dressing" of the stock markets by portfolio managers.
In times of doubt, investor should focus on cash investment such as their money market securities, saving accounts and short-term CDs. Mutual funds are another easy option for investors to place their cash into money market securities. For a short-term basis as well as to increase their defenses against the market insecurities, one should increase his or her asset allocation to cash.
The best advice is to not follow the herds. The strategy is to survive financially with your investment assets constantly intact.
Despite the fact that aggressive investment at times can lead to higher profits or high defenses can lead to lower risks, it is time for investors to lighten up and diversifies their asset classes for their long term benefits. The reason is because of the fast changing markets which would cause the investment landscape to change considerably. Thus, it is wise for investors to lower the risks of their asset allocations or to maintain their asset allocations at acceptable level of risks.
To avoid heavy losses, one can consider cutting their exposures and shortening their maturities if they hold bonds or bond funds. They can shift their bond funds to another category such as intermediate-term or short-term bond funds. Although investors might sacrifice higher interest income, they will increase their level of securities with this strategy. On the other hand, in terms of stock or stock funds, investors should consider stocks that closely follow the market in general unless they opt to speculate. The reason is because of the instability of the stocks and stock funds as well as the "dressing" of the stock markets by portfolio managers.
In times of doubt, investor should focus on cash investment such as their money market securities, saving accounts and short-term CDs. Mutual funds are another easy option for investors to place their cash into money market securities. For a short-term basis as well as to increase their defenses against the market insecurities, one should increase his or her asset allocation to cash.
The best advice is to not follow the herds. The strategy is to survive financially with your investment assets constantly intact.
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