This type of dynamic rebalancing strategy is offered by select wealth managers and often utilized by both high net worth individuals and institutions alike. ![]() Employing certain investment risk management strategies can help to minimize the impact of them while meeting your goals.Ī strategy that includes dynamic asset allocation-making frequent adjustments to your portfolio’s mix of asset classes to increase the weights of higher-performing assets-might be a good idea. The reality is that drawdowns are part of the game. Having both in your portfolio can help limit your risk and stabilize your portfolio if you are at a point with your financial plan where you may be really focused on protecting your nest egg.ĭesign a strategy that slows portfolio drawdown When stocks go up, bonds tend to decrease and vice-versa. Owning assets with different risk levelsīe aware: Some markets historically have had an inversely proportional relationship to others-meaning, when one market goes up the other tends to go down.Ī classic example are stocks and bonds.Owning assets in multiple different asset classes, such as stocks, bonds, and real estate.Owning multiple types of the same asset class, such as stocks from different sectors. ![]() There are levels of diversification, too. ![]() It’s meant to mitigate your loss-if one sector were to decrease, your diversification across multiple sectors can reduce the impact of those losses. Spreading your investments across numerous asset classes and sectors reduces your portfolio’s reliance on any particular one. This classic piece of investment advice is everywhere for a good reason.
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