Investing

5 Steps to a Bulletproof Portfolio

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Are you looking to add some financial armor to your personal investment portfolio during a volatile year? If so, you are not alone. Many are tightening their budgetary belts and hunting for ways to strengthen all the components of their holdings. For instance, there are those who are leveraging the power and safety of DRIPs (dividend reinvestment programs) to build long-term wealth with growth stocks. Others are exploring the idea of putting rental home investments into self-directed IRAs for a double-dose of tax savings. 

Exchange traded funds (ETFs) are enjoying a new wave of interest from cautious savers who want to diversify their holdings and take advantage of entire sectors that perform well in an iffy economy. Building a solid portfolio is about spreading risk, focusing on high-performance investments, and using precious metals and cryptocurrency to hedge against inflation. Here are details about the five steps anyone can take to strengthen their personal financial security.


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DRIPs (Dividend Reinvestment Programs)

DRIPs have been around for decades and continue to be among the most popular vehicles for savvy savers and investors. That’s because the programs are designed to automatically reinvest all paid dividends every quarter. Many working people put growth stocks that pay regular dividends into their IRAs to leverage the power of compound interest the ability to defer taxes on the capital gains.

REITs for Retirement

Investing in rental homes the smart way means putting your retirement account on autopilot. Those who understand how to use the reit tax advantage can save at tax time when they use a self-directed IRA to hold their property shares. Not only do you get the tax advantage. Because the IRS views most REITs as pass-through rental properties, investors not only get the benefit of appreciation but rental income as well. For investors who want to retain more of their short-term and long-term earnings in IRAs that hold REITs, there’s really no more efficient way to maximize income and gain a significant tax advantage.

ETFs

ETFs are one of the best ways to diversify a portfolio in a single stroke. The assets offer buyers the chance to hold shares that track entire market sectors, like healthcare, technology, or financial institutions. The funds make it easy for anyone to speculate on segments of the market that have the potential to rise in troubled times, as healthcare stocks have done during the COVID pandemic.

Bitcoin and Ethereum

The two largest players in the cryptocurrency market, bitcoin and ethereum, are the most preferred assets for people who wish to use cryptos to diversify their portfolios, gain a hedge against the current inflationary trend, and get exposure to the huge appreciation potential of the world’s most talked-about alt-coins. Consider using the two-percent rule when adding these risky assets to your holdings. Namely, don’t keep more than two percent of your entire portfolio in cryptos.

Precious Metals

Precious metals like gold and silver are other hedging instruments but don’t come with the extreme price volatility as cryptocurrency. For decades, savvy savers have been using precious metals as an inflation hedge by limiting portfolios to no more than 10 percent of the shiny asset class.


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The content of this website is for informational purposes only and does not represent investment advice, or an offer or solicitation to buy or sell any security, investment, or product. Investors are encouraged to do their own due diligence, and, if necessary, consult professional advising before making any investment decisions. Investing involves a high degree of risk, and financial losses may occur.


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