Navigate uncertain investing waters.
The S&P 500 is nearly flat this year. Volatility is rampant as new investors experience their first down market. There’s an abundance of investment anxiety with rising interest rates, tariffs and a volatile global economy. Although no one knows what 2019 will bring, financial experts have tips for navigating uncertain investing waters. Despite suggesting various investing strategies, there’s a universal recommendation shared among financial professionals: assess goals, time horizon and risk tolerance before making financial decisions. Here are seven expert investing moves for next year that offer ideas for all types of investors, whether it’s a high-net-worth individual or passive management aficionado.
Find best fund bargains.
“Buy now instead of waiting until the end of the year, since tax-loss selling tends to peak in late November and the best fund bargains are the shares, which have experienced the heaviest outflows,” says Steven Jon Kaplan, CEO at New York-based True Contrarian Investments. Kaplan likes sector plays, such as VanEck Vectors India Small-Cap ETF (ticker: SCIF), Xtrackers Harvest CSI 500 CHN A SmCp ETF (ASHS), VanEck Vectors Oil Services ETF (OIH), and Global X CopperMiners ETF (COPX) — all down between 20 and 40 percent since January 2018. VanEck Vectors Junior Gold Miners ETF (GDXJ), down 19.95 percent, is another Kaplan favorite with insider buying suggesting that the fund owners are optimistic.
Consider U.S. stocks.
U.S. stocks are a favorite of Daniel Lugasi, portfolio manager at VL Capital Management in Winter Park, Florida. “For those investing in the U.S., we tend to favor a core and explore strategy. This approach allocates most of one’s assets to large-cap U.S. stock index funds with the remainder going into a concentrated portfolio of individual stock picks,” Lugasi says. The strategy invests in a core of passive index funds, representing the U.S. stock market with a smattering of well-researched stock picks; it incorporates the best of both active and passive management. Specifically, investors can outperform the broader market with specific stock picks without assuming excessive risk, he says.
Pay down your debt.
The best investing move just might be paying down debt, says Judith Corprew, executive vice president at Patriot Bank in Stamford, Connecticut. “Many investors forget that paying down high-interest debt will sometimes offer more benefits than almost any type of investment. Imagine you have $20,000 of credit card debt with a 23 percent APR. Very few investments earn that kind of return. By paying down that high-interest debt before you start investing, you can save money long term,” she says.
Explore tax-advantaged funds.
An opportunity zone is an economically-distressed community where new investments, under certain conditions, may receive preferential tax treatment. Chris Rawley, CEO at Harvest Returns in Fort Worth, Texas, says he’s “especially excited about the tax advantages that qualified opportunity zones bring to high-net-worth investors.” Experts say new opportunity zone funds give investors a chance to benefit from tax-advantaged investments. Caliber Tax Advantaged Opportunity Zone Fund, for instance, is a new offering for accredited investors who can fork over $250,000 as a minimum investment. Other opportunity zone funds are offered by Virtua Partners and Fundrise. Accredited investors can invest in the Fundrise Opportunity Fund for a minimum of $25,000.
Evaluate whether to invest in private equity.
The return of stock market volatility in 2018 is a driver to add private equity to high-net-worth portfolios, says Matt Ahrens, a financial advisor at Integrity Advisory in Overland Park, Kansas. Like it sounds, private equity is investing in privately owned companies. This strategy is geared toward accredited investors with a liquid net worth more than $1 million. “Historically, private investments offer a smoother ride as well as the opportunity to outperform a choppy public market going forward. Private offerings looking to deploy cash over the next three to four years should find plenty of good buying opportunities for the patient investor,” Ahrens says.
Implement a passive management approach.
A passive investment management approach is proven time and again to outperform active investment strategies. Brook Anderson, a financial advisor at Kaizen Financial Advisors in Kirkland, Washington, says investment strategies shouldn’t change year to year unless your personal financial situation has changed. “Embrace academically-proven strategies that have stood the test of time,” Anderson says. These classic investment tenets include diversifying holdings, rebalancing investments regularly to curtail risk and choosing passive over active investment management. Anderson reminds investors to stick with low-cost ETFs, so that more investment dollars are deployed into the market, and not into a fund manager’s pocket.
Consider investment-grade bonds.
Fixed-income investors, such as retirees, might add longer duration and higher quality bonds to their portfolios, says Jeff Mills, co-chief investment strategist at Philadelphia-based PNC Financial Services Group. He recommends investment-grade bonds. “A combination of diminishing positive economic surprises and potential moderation in domestic economic growth in 2019 suggests that there is less potential for additionally higher interest rates over the next 12 to 24 months,” Mills says. Duration translates into the approximate measure of a bond’s sensitivity to changes in interest rates. Bonds with shorter durations are less volatile compared with those with longer durations.
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