How should investors think about protecting their gains from the recent market rebound, and when should playing defense become a bigger consideration? EquityThe amount of money that would be returned to shareholders if a company’s assets were sold off and all its debt repaid. Research Analyst Kate Austin discussed the role of bondsA financial instrument representing an IOU from the borrower to the lender. Bond issuers promise to pay bond holders a given amount of interest for a pre-determined amount of time until the loan is repaid in full (otherwise known as the maturity date). Bonds can have a fixed or floating interest rate. Fixed-rate bonds pay out a pre-determined amount of interest each year, while floating-rate bonds can pay higher or lower interest each year depending on prevailing market interest rates. in portfolios and the markets’ potential to decline again in our recent quarterly webinar*: Separating Pandemic Noise From Investment Signals.
Please enjoy the excerpt below and click here for the full webinar replay to hear more.
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Kate Austin: There’s a real possibility that we may retest the lows, but it’s also a very real possibility that we don’t. And just because there’s so much uncertainty around the virus and then when everything returns to (I’m using air quotes) “normal,” I think we’re going to really see a big piecemeal nature of a lot of these countries and states trying to get back to work while others don’t.
And so I think it really means that we’re going to just see more volatilityA measure of how large the changes in an asset’s price are. The more volatile an asset, the more likely that its price will experience sharp rises and steep drops over time. The more volatile an asset is, the riskier it is to invest in. in the coming weeks and months ahead. And we do live in a global economy with global supply chains that wrap all around the globe. And we’ve really seen and will continue to see more disruption then it’s not as easy as just flipping a switch.
As for bonds, they’re always a great asset class and usually work like a buffer in the portfolio. But, “What types of bonds?” and “How much you should allocate to bonds?” are as important as the question of “should they be in my portfolio?” But those are really personal questions and depend upon your risk toleranceThe amount of loss an investor is willing to absorb in their investment portfolio. and what you’re looking to get out of your retirement and a bunch of other things that would probably best be answered by your financial adviser. So we would encourage you to reach out to them.
*Webinar recorded after the market closed on Wednesday, April 22, 2020.
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