Bob is interested in adding gold to his portfolio after reading the results of a joint study by the World Gold Council and New Frontier Advisors. The study found that the appropriate allocation to gold is dependent on the portfolio risk level, recommending a 1-2% allocation for low risk portfolios and 2-4% in a balanced risk portfolio.
Category: Case Studies
Fran is rebalancing her portfolio after the recent market turmoil and wants to simplify her fixed income investments. Her previous financial advisor was recommending individual bonds issued by banks that are now either out of business or severely weakened by the financial crisis. She’s learned her lesson – diversification is more important than an extra few basis points of yield.
Before the 2008 market downturn, Bill and Karen were planning to retire within the next 3 to 5 years. As the market correction continued into 2009, the couple decided that capital preservation was the number one priority and moved most of their investments into cash.
To preserve wealth and generate some income, Jim moved a healthy portion of his portfolio to Long Term Treasury Bonds. However, the improving economy combined with the Fed’s massive monetary response to the financial crisis has Jim concerned about the potential for a rising interest rate environment within the next 12 to 18 months.
U.S. investors have fully embraced the idea of diversifying their portfolios with international equities. However, investing outside the border of the U.S. exposes portfolios to currency fluctuations.
With low rates on money markets and CDs, investors have turned to bonds in a big way. However, as we get closer to the day when the Fed changes interest rate policy, bond investors are looking for other ways to supplement the income from their portfolios.
With the city of Harrisburg, PA on the verge of bankruptcy and other cities and states in financial trouble, investors should be revisiting the role of tax-exempt bonds in their portfolios. ETFs offer investing possibilities to investors seeking tax-exempt income without the risk of exposure to a single municipality or state.
Portfolio diversification calls for spreading investment risk across asset classes and geographies. In many cases, exchange traded funds offer investors the opportunity to do both.