The year 2016 has begun and this means changes are abound, especially in the financial world. One of these changes will affect investors and all other market participants across the globe, namely the Fed interest rate hike.
For seven years, the Federal Reserve or Fed has enforced the zero interest rate policy. This year, that policy is ending. And with this looming development on the way, market participants are adjusting accordingly. Here are some portfolio strategies that might just want to consider this 2016.
Welcome Aboard Abroad Assets
As a new year begins, investors are facing a more difficult market environment. Current valuations are above average and experts are seeing a strenuous year for the US markets. Fortunately, market experts are seeing the exact opposite outside of the US. Stock prices abroad are looking healthy with emphasis on Europe and Japan. Abroad, valuations are steadier and central banks, still implements monetary easing.
Become More Active
The market is set to be more volatile this year while equity returns is set to become moderate. This means that traders and investors only have two choice, face head on the volatility and take greater risks or ride the equity moderation and just accept that this year is a year of lower returns. However, the basic goal of trading and investment is to generate revenue so the instead of accepting lower returns or taking greater risks, why not just become more active. The strategy is to find active managers and source portions of their returns.
Long-Term Bond Diversification
The looming changes that will set off this year’s financial storm can be weathered using the good old help of years of experience. Diversification is a product of years of standing through numerous financial problems, market crashes, and general negativity. It is one of the best approach to prepare for a tough year. And with all the news and wayward predictions this year, you should immediately turn to diversification as your hedging with special attention to long-term bonds. Long-term bonds are able to withstand unexpected events and situations geographically such as political unrest, unexpected growth or shrinking, and economic instability.
2016 is going to be a demanding year for the financial industry and it is best if you enter it ready. Research your options and know what your strengths and witnesses are. And no matter what this year throws at you, you will be ready to take it on.