Stacey’s 5 Investment Tips for Fall 2020
Stacey’s 5 Investment Tips for Fall 2020
By: Stacey Nickens
The last few months have brought significant financial uncertainty. Heading into the fall, many of us are wondering how COVID-19, the presidential election, and other events will impact the stock market. With so many unknowns, how can you best ensure that your portfolio will see gains instead of losses?
1. Maintain a Diversified Portfolio
While this tip is always the case, you may consider changing your stock/bond mix in accordance with the changing economy. Traditionally, bonds and preferred stocks offer less risk for a more guaranteed return. However, some bonds and preferred stocks aren’t performing as they traditionally would and may hold more risk than would be the case in a traditional market. With that in mind, it may be time to reassess your risk strategies and form less traditional bond portfolios. Additionally, even risk-averse investors should look into more growth-oriented positions. Focus on companies with strong earnings reports and/or a healthy history of dividend payments. I would especially focus on shares in the top three best performing sectors: information technology, consumer discretionary, and communication services.
2. Broaden Your Perspective
With the value of the dollar fluctuating, looking at markets outside of the US may be a prudent choice. Make sure to be selective if you choose to do so. Weigh risk and cyclical concerns against valuations and structural trends.
3. Take the Higher Ground
High-qualify, investment-grade bond funds still offer an excellent opportunity to earn regular income. Some corporate bonds have strong long-term potential right now. In the Spring, the Fed began buying corporate bonds in order to inject liquidity into the market. Doing so improved the valuation of some of these corporate bonds.
For those who traditionally buy government bonds, you may consider looking at municipal bonds. Current yield pick-up rates may make this strategy especially helpful to investors in higher income brackets.
4. Look At Other Income Sources
Bond Funds are not the only income sources in the stock market. I would also look at a variety of ETFs. Consider biotechnology ETFs such as the iShares NASDAQ Biotechnology Index (IBB). Biotechnology ETFs could hold a number of quality, dividend-paying stocks. They would also give you broad-based exposure to the healthcare and technology industries with less of the risk associated with individual company stock. Similarly, the QQQ ETF broadly follows the top 100 companies in the Nasdaq, giving you access to growth with less risk.
5. Innovation Will Continue Beyond the Recession
Investing in remote work and entertainment solutions could offer lots of long-term growth potential to your portfolio. Many companies have significantly extended their remote working timelines, and services that make it easier to live and work from home will likely continue to see growth. Additionally, digitization is not a new trend. It began far before COVID and will likely continue long after. So stocks in companies such as Docusign, Zoom, Microsoft, and Netflix could see growth far into the future.
