3 Unstoppable Investments Everyone Needs in Their Portfolio | Smart Change: Personal Finance | gazettetimes.com – Corvallis Gazette-Times

3 Unstoppable Investments Everyone Needs in Their Portfolio | Smart Change: Personal Finance | gazettetimes.com – Corvallis Gazette-Times

With the stock market falling throughout much of 2022, investors are rediscovering the risk involved in investing. The unfortunate truth is that your money is always at risk of some sort of loss, whether it’s invested or not. As a result, it’s critically important to put parts of your money to work in different ways in order to create an end-to-end portfolio that works better for you. You can’t eliminate risk entirely, but you can manage it in a way that improves your overall chances for success.

If you want to make your overall portfolio more resilient, you need to put some sort of risk management front and center in your plan. Individually, the investments called out below may not seem like much, but together, these three choices get your overall portfolio that much closer to unstoppable, even in this market.

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No. 1: Cash

It might seem strange to consider cash unstoppable, particularly in an era when inflation keeps running hot. Despite that challenge, cash has one key advantage over other asset classes: It’s what you use to pay your bills. On top of that, it’s the yardstick against which other assets are measured. As a result, as awful as cash’s performance has been when measured against inflation this year, it has far beaten investing in the stock market.

Of course, if cash beats stocks over the long haul, then we all have much bigger things to worry about. As a result, while it’s important to have some cash, it’s also important to not overdo it. A good guideline is to have enough cash to pay your bills, plus about three to six months’ worth of costs in an emergency fund in case you face one of those unfortunate “life happens” moments.

Much more than that, and you’ll be at risk of having too much of your money over-exposed to inflation. Much less, and you’ll be at greater risk of being forced to sell your stocks while they’re down to cover an unexpected expense.

No. 2: High-quality bonds

If you’ve got bills you expect to pay from your portfolio within the next five or so years, stocks can be an incredibly dangerous place for that money. After all, if the market goes down (like it has in 2022) and you’re depending on selling your stocks to cover your bills, then you’ll be forced to liquidate that many more shares to cover your costs.

For money you’ll need in the near term, bonds have some key advantages over stocks. First, typical bonds have predictable payments — regular interest payments at published dates, followed by a principal repayment at maturity. That makes bonds far more suitable than stocks for duration matching — turning an …….

Source: https://www.gazettetimes.com/business/investment/personal-finance/3-unstoppable-investments-everyone-needs-in-their-portfolio/article_de7cc087-26c8-55fe-9496-ffdb06048449.html