Three Defensive Moves Women Should Make Now
My son plays defense for his college football team and this year defense is winning their games! As the saying goes, oftentimes the best offense is a good defense. For the past decade we have experienced tremendous “offense” in the stock market with double digit growth, but with stocks and bonds having a challenging year due to inflation, rising interest rates, and a slowing economy, it's time to play defense!
Here are three defensive plays I recommend adding to your playbook:
#1. Build a Bond Ladder with Short term Treasury Bills and Notes
Bonds are seeing their highest yields in over ten years. A year ago, a Treasury Bill (T-bill) was paying less than 1% interest. As of October 19th, 2022, a one-year T-bill pays nearly 4.5%. (Treasury Bills and Notes are backed by the US Government and are the safest investment you can make). Furthermore, the Fed is expected to raise interest rates by another 1.25% by the end of the year. So building a bond ladder can help you take advantage of rising interest rates.
For instance, looking at this graphic, when your 3-month T-bill matures, if interest rates have risen, you can reinvest your money into the new higher paying bond. When you create a bond ladder you are essentially creating your own bond fund with rolling maturities, ensuring the safety of your principal and income.
#2 Buy defensive stocks that pay a dividend.
What are defensive stocks? When you hear the word defensive, think of what you, as a consumer, will buy no matter what happens to the economy; healthcare, utilities, energy, and consumer staples are examples of defensive sectors. Within these sectors you will find stocks like Proctor and Gamble, Coca cola, Pfizer, and these stocks pay dividends. (For a list of companies in each industry, click here.)
#3 Diversify your assets.
Part of the volatility we have experienced this year is due to the stock market trying to guess how much the Federal Reserve will raise interest rates. Yet, volatility occurs every year. Volatility is a feature of the market, not a flaw. Volatility is best dealt with through diversification.
Looking at this chart, you will notice that the bars of the balanced portfolios,(brown) in the rolling 5, 10, and 20 years have experienced positive returns and less volatility. (1) Diversification is key for your defense.
You don’t have to stay idle on the sidelines while watching your investments lose value. If you want to know more about how to implement these defensive strategies, please contact me here to schedule a complimentary “Get to Know You” Zoom call.
[1] am.jpmorgan.com/us/en/asset-management/protected/adv/investment-strategies/model-portfolios/views-resources
