A number of potential headwinds stand ready to hit investor portfolios hard: from rising interest rates to the threat of nuclear war of late.
With global geopolitical tensions beginning to heat up, investors considering piling on risk in today’s economic backdrop may be few and far between, with a potential risk selloff spooking investors considering high-growth companies toward safer bets in sectors typically considered to be less aggressive.
How aggressive an investors wants to be with a given portfolio is all relative, and related to the level of risk-comfort an investor has as well as his or her need for income and allocation preferences at any given time.
Where an investor is on his or her investment journey (from starting out to retired and in need of income) will determine a large part of the risk profile such an investor is willing to take, with the remainder linked to how willing a given investor is to taking on additional risk relative to his or her peers.
Taking on additional risk during a bull market is typically seen as a prudent thing to do. Maximizing returns while the market remains hot simply makes economic sense.
It is true, however, that the group of investors that decided to take on additional risk in good times finds it much more expensive to hedge downside come a bull market, something every investor should be considering today, in my opinion.
It never hurts to have flood insurance before the waters rise, when it is cheap. Recent tensions have driven the price of gold and commodities companies higher of late, and while it is impossible to predict where these sectors will ultimately go, it is prudent to consider buying such sectors on weakness moving forward for one’s portolio (at least a small percentage).
Invest wisely, my friends.
