Table of Contents
- Protect Your Portfolio
- Assess Your Investment Risk
- Earn Risk-Free Money
- CDs Are a Safe Bet
- Payoff Existing High-Interest Debt
- Tricky Bear Market Tips?
- About Mike Greco MBA
Protect Your Portfolio
During uncertain economic conditions and rapidly changing interest rates, playing defensive – and – PROTECT YOUR PORTFOLIO in a bear market is essential. While current economic conditions are not dire, significant economic headwinds and geopolitical events are unfolding, likely pushing equities much lower. How do you protect your portfolio in this market? What should you do?
Assess Your Investment Risk
First, you need to assess your investment risk. List all your cash and investments. Make sure you are diversified in at least 3-5 different sectors for your equities. Allocate no more than 50% of your portfolio to these defensive plays during the bear market. Defensive plays could include materials, agriculture, oil and gas, consumer staples, and utilities. I like sector-oriented Exchange Traded Funds (ETFs) as the investment vehicles. Avoid single stocks. The ETF fees are typically low and offer significant diversification. Vanguard’s ETF offerings are a great place to look. Vanguard offers eleven Sector and Specialty ETFs for consideration. Generally, Utilities, Energy, and Consumer Staples ETFs are great defensive plays. Minimize your exposure to Technology and Consumer Discretionary sectors – as these sectors are more volatile, and overexposure to them will make it harder to protect your portfolio in a bear market.
Earn Risk-Free Money
Next, look at the other 50% of your portfolio. Hold these funds in CASH or CASH-like instruments such as Certificates of Deposits (CDs) or Treasury Bonds. Ride out the upcoming economic storm and wait a bit to reinvest in more risky equities. There are numerous options for brokered CDs, CDs, and treasury bonds yielding 3.5% or more in the market. For instance, if you have a Vanguard account, search for “brokered CDs,” and current rates range from 3.3% (1-3 Months) to 5.00% (7 Years) and are FDIC insured up to the $250,000 limit. Not bad for zero risk on your investment. Yes, you can get brokered CDs with terms as short as 1 MONTH in this market for plus 3%!!!
CDs Are a Safe Bet
Generally, investing in CDs is a safe bet. CDs are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) at credit unions. CDs will provide you with a guaranteed rate of return and safety in the current market. CD rates will rise as the Federal Reserve increases, although more slowly than credit cards and variable loan rates. I have found excellent rates on CDs at credit unions and have listed some of the better rates in the Top CD Rates post.
Payoff Existing High-Interest Debt
Another easy way to increase your overall portfolio return is to pay off existing high-interest or variable-interest-rate debt – such as a credit card or a home equity line of credit balance. If you pay off a $10,000 credit card balance with a 20% interest rate, you just made 20% with the money invested. Bankrate.com has a great Credit Card Payoff Calculator to show you how much money you can save by paying off a high-interest credit card. You will be surprised how much money you will save by paying off debt.
Tricky Bear Market Tips?
Do you have any tips for navigating this tough bear market? How are you protecting your portfolio? What is your investment strategy in a bear market? Share this post and your tips! If you have a question, email Mike and share your story! Also, if you need help with a defensive strategy, consider enlisting the help of a Financial Coach – here is a post that discusses the benefits.
About Mike Greco MBA
Mike Greco MBA is a business, finance, and technology website.
Learn more about site founder Mike Greco and his recent eBook – The Debt Free Journey.
Mike is an AI enthusiast and publisher of AI Insights, a LinkedIn Newsletter.
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Mike Greco is a finance expert and business consultant based in Fort Lauderdale, Florida. Mike holds an MBA from Chaminade University of Honolulu. He has a wealth of experience in the military, construction, and banking industries. He is passionate about helping people and businesses succeed and shares his knowledge through his blog. Mike enjoys spending time with his wife, Elsie, and their mini poodle, Humberto.
