Today’s stock market gyrations test the mettle of investors young and old.
Even the Generation Xers (born early ‘60s to mid 70s) may opt to pile into more aggressive stocks given their long time-horizons. Over time, the stock market can deliver reward equity investors with higher returns, as noted in a MarketWatch overview.
But investors with a balanced portfolio are usually in good shape to weather market downturns. Usually, well-balanced investments reflect the investor’s risk tolerance.
Just as importantly, such a portfolio can beat the diminishing purchasing power of inflation.
The Wall Street Journal notes how important it is for investors nearing retirement to adhere to strategies that champion investing smart. Investors eager to reach for more return on their portfolio would be ill-advised, notes the WSJ, to choose a 100%-stock and stock mutual fund portfolio: It is not considered to be a prudent investment. In the latter instance, a sound financial strategy reflects a mix of stocks-and-bonds mirroring both the investor’s time horizon and risk tolerance.
On the other end of the investment spectrum, bonds and bond funds do provide a measure of security and fixed income. However, they do so with interest rate risk, which is part of the uncertainty commonly associated with fixed income investing. Regardless, what is often referred to as the ‘fixed’ portion of a portfolio will often be the anchor needed during a market downturn.
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