2016 PORTFOLIO CONCEPTIONS

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Be (More) Active

If your trading is not that animated last year, become more active this 2016. There is a possibility equity returns will moderate and volatility will surge. Either take a greater risk or accept lower returns. You can obtain some of the returns by turning to active managers. In the past six years, firm returns and low volatility bolstered indices as active managers lagged their benchmarks. But higher volatility is tantamount to greater distribution of returns.

Diversify Using Long-term Bonds

You’ll never go wrong with this classic investment advice: diversify your portfolio. Traders who invests in equities heavily are susceptible to any growth or political shock. However, if you still prefer stocks, implement the right hedging strategy.

Longer-duration bonds, on the other hand, are reaffirming their role to minimize portfolio perils. In case you want to hold bonds, go with conventional Treasuries or the complex ones such as the Treasury Inflation Protected Securities.

Explore Foreign Investments

Betting on US stocks may not be a good idea as of the moment. Despite higher valuations, they may be facing considerable headwinds this year.

Equities abroad, especially Japanese and European shares, are becoming more appealing. Central banks still implement market-friendly monetary policies and the stocks have more irrefutable appraisals.

Stock prices in emerging markets, amid recent underperformance, seem reasonable. It is fighting a strenuous battle driven by weak exports, robust greenback, and dropping commodity prices. When it comes to EM equities, be selective by mixing more gritty indexed approaches or approaching an active manager who can pinpoint opportunities and manage portfolio risks simultaneously.

Hedge Currency Exposure in Global Markets

Obviously, a strong US dollar and weaker euro widens the divergence in monetary policy. It is therefore sensible to hedge currency exposure internationally.

Implement Unconstrained Income Strategy

Interest rates will likely remain long, making income one of the hottest commodities this year. It takes more than a single asset and thorough balancing of yield and risk in order to generate sufficient income.