Here we discuss the two main asset classes to choose from and what key influences they each have that you need to keep in mind or use as talking points with your advisor when formulating your investment portfolio.

Equities and Securities:

The key influencers for equities are the current and future economic outlook, policy changes, current business cycle, market valuations, and the overall investment sentiment.

Fixed Income:

The key influencers for fixed income investments would be the same as equities but also include the duration, credit, and yield curve of the investment.

If you are purchasing securities in foreign currency your advisor will have to consider the foreign economy and policy as well as the current rates and inflation.

Christine’s Tip:

Make sure you understand each investment product you have chosen with your advisor and are aware of the potential risks as well as the potential future rewards.  Often times a “collar strategy” is a better approach especially for those nearing or now in retirement.  This is a proactive strategy that includes giving up some of your upside return in exchange for downside protection.  With this method you would split your portfolio into three main components. 

1. One would be for lower volatility securities which still have some future growth potential, (for example, a low-volatility equity ETF). 
2. The second portion would be for securities that have more stable and smoother returns and dividends, (for example, a mix of blue-chip dividend SMAs).
3. The third portion would be a fixed income fund that concentrates mainly on capital protection, (for example, a fixed income SMA with a floor value return).

Why not discuss a “collared strategy” with your advisor.  I have always recommended this approach to clients that are wanting to reduce volatility and require capital protection.  It still gives you the traditional diversification that you need but provides a more consistent return and hedges against significant market declines.