Reducing Risk For Income Oriented Investors
Finding ways to generate income without excessive exposure to interest rate risk has been a top priority for many investors recently.
The big fear is that interest rate increases will result in lower market valuations for their bonds.
So what a big alternative has been for a lot of these anti bond investors has been dividend securities, which have not only been fairly volatile on a year-to-date basis, but seem to have very little room to grow while the economy continues to hiccup in its recovery efforts.
As such, the risks involved with dividend paying securities has been A couple of ways to continue receiving income from your investment portfolio while positioning your investments for growth and also reducing risk is through further diversification.
There are two types of important ways to achieve better diversification with your investment portfolio, particularly if you are aiming to reduce volatility exposure and keep the income stream steady.
The first recommendation would be to invest in global securities.
Rather than stay close to home and investing 100% of your portfolio in domestic equities, diversifying by way of geographical location will help to offset some of those risks that we have seen with domestic securities.
Namely, you will want to avoid being reliant on the domestic economy which has been having a tough time getting started again.
Another point worth mentioning is that global securities for the most part have outperformed domestic equities, putting greater emphasis on the importance of global diversification as a way to improve returns and minimize risk.
The second recommendation would be to invest in different assets.
If you are looking specifically for income producing assets, that will include investing in preferred equities as well as common equities, short-term as well as long-term bonds as well as various investment grade bonds.
By getting as much exposure to different bond types and ratings, you will be able to diversify out of the income streams while at the same time remaining exposed to all of the right asset classes.
This makes for cautious investing given how bonds have outperformed this year while everyone started dumping them in late 2009.
Until the economies you want to target start to take a clear path toward expansion, staying diversified will help to regularize your income stream while at the same time reducing your risk exposure.
This is a priority for most investors to begin with, but given the amount of fear and anxiety on investors' minds, it is also a tough decision to make.
The big fear is that interest rate increases will result in lower market valuations for their bonds.
So what a big alternative has been for a lot of these anti bond investors has been dividend securities, which have not only been fairly volatile on a year-to-date basis, but seem to have very little room to grow while the economy continues to hiccup in its recovery efforts.
As such, the risks involved with dividend paying securities has been A couple of ways to continue receiving income from your investment portfolio while positioning your investments for growth and also reducing risk is through further diversification.
There are two types of important ways to achieve better diversification with your investment portfolio, particularly if you are aiming to reduce volatility exposure and keep the income stream steady.
The first recommendation would be to invest in global securities.
Rather than stay close to home and investing 100% of your portfolio in domestic equities, diversifying by way of geographical location will help to offset some of those risks that we have seen with domestic securities.
Namely, you will want to avoid being reliant on the domestic economy which has been having a tough time getting started again.
Another point worth mentioning is that global securities for the most part have outperformed domestic equities, putting greater emphasis on the importance of global diversification as a way to improve returns and minimize risk.
The second recommendation would be to invest in different assets.
If you are looking specifically for income producing assets, that will include investing in preferred equities as well as common equities, short-term as well as long-term bonds as well as various investment grade bonds.
By getting as much exposure to different bond types and ratings, you will be able to diversify out of the income streams while at the same time remaining exposed to all of the right asset classes.
This makes for cautious investing given how bonds have outperformed this year while everyone started dumping them in late 2009.
Until the economies you want to target start to take a clear path toward expansion, staying diversified will help to regularize your income stream while at the same time reducing your risk exposure.
This is a priority for most investors to begin with, but given the amount of fear and anxiety on investors' minds, it is also a tough decision to make.