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How Do I Protect My Portfolio In A Bear Market?

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Apr 17, 2008 10:41 am US/Pacific

How Do I Protect My Portfolio In A Bear Market?

  QUESTION: What's the best way to protect my stock portfolio against a bear market?

ANSWER: In my opinion you are not going to side step each down turn in the stock market.  However, having bonds and potentially some commodity exposure in your portfolio will reduce the volatility you are experiencing.

Stocks have historically given a higher rate of return over the long term, so keep in mind as you increase your exposure to asset classes such as bonds, you are probably not going to be increasing your returns, but rather decreasing your risk.  Remember, one of the reasons an investor may achieve higher rates of return in the stock market is because that investor is willing to observe a greater amount of uncertainty of what that holding will be worth day to day.  However over the long term, stock returns are directly related to the underlying earnings of the company in question.
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Money Matters is provided by:

David Schauer, CFA, MSFA, CFP®
Financial Planner
Hanson McClain
E-mail questions to moneymatters@kovr.com


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