With all of the uncertainty in the financial markets nowadays due to COVID-19, many people are reassessing their investment strategies. There have been huge drops in the stock market, which has frightened many individuals. So, some investors have decided to try and implement an investment strategy that helps to preserve their assets. This is commonly referred to as a defensive strategy, as opposed to an aggressive strategy which seeks to maximize asset growth. Below are several ideas for people who want to implement this sort of defensive strategy.
Consider Short Term Government Bonds
Bonds are less volatile than stocks. So, having your assets in bonds will be more stable overall. However, it is important that you understand which type of bonds to buy. Anyone who remembers the junk bond crisis of the 1980s will attest that not all bonds are safe. So, steer clear of corporate bonds, especially high yield bonds. The type of bonds you should look for are short term government bonds. These are more secure than bonds issued by a company. The short duration will safeguard the investment as you aren't locked in for a long time should interest rates change dramatically.
Diversify With A Mix of Blue Chip Stocks
You will want to have some of your investments in stocks, but it is important that you diversify. The best approach is to invest in a mix of blue-chip stocks. You never want to invest heavily in a single company as that presents too much risk. So, what you should do is invest in something called an index fund. These are investments that are based on a large grouping of companies. The other benefit of investing in an index fund is that you only have to keep track of one investment. You won't have to check the current values of numerous different stocks, thereby simplifying your bookkeeping.
Precious Metals In Your IRA
Finally, one idea to consider is to add precious metals to your investments. You can do this by adding previous metal-based investments to your IRA. There are funds you can buy that are tied to the value of silver, gold, and other precious metals. This is a superior method to actually buying and holding gold. If you were to buy and hold gold, you would have to deal with storing it and safeguarding it. So, buying a precious metal-based investment for your IRA is a wise alternative.
For more information, reach out to a company like McAlvany ICA.