Retirement: How To Manage Risks And Prepare For The Next Downturn

Oct. 13, 2018 9:00 AM ETABBV, AMGN, BA, BBN, BCE, BUD, D, ENB, EPD, GSK, HD, IBM, ITW, LRCX, MET, NMZ, O, PDI, PFF, PM, QCOM, SBUX, SHY, SO, T, TIP, TXN, UL, UPS, VBMFX, VFINX, VGTSX, VNQ, XOM, BCE:CA, ENB:CA109 Comments

Summary

  • The continuing bull market of the last 10 years has helped almost everyone. Moreover, the index investing has been the king.
  • The bull market may continue for the foreseeable future, but eventually, the cycle will change. Fortunately, we do not need to predict the future to be successful in the market.
  • This article focusses on how to manage risks in your portfolio and prepare for the next downturn, while not compromising on growth.
  • We provide a 3-bucket portfolio structure to prepare for the future.
  • Looking for a portfolio of ideas like this one? Members of High Income DIY Portfolios get exclusive access to our model portfolio. Get started today »

Let's say you already have a million dollar portfolio, mostly invested in the index funds. The bull market of the last 10 years has helped your portfolio tremendously due to the outperformance of the broad market indexes. It has been difficult for most people and strategies to beat the broad market indexes in the last few years. You are sitting pretty with the thought that with other income streams like social security and maybe some pension you are going to sail through retirement comfortably with one million dollar portfolio. We agree to a large extent. But there are a few "kinks" in this scheme of things, and that depends on what the markets are going to do in the next few years and when you would start needing withdrawals from the portfolio.

The elephant in the room is the question of how much longer this bull market would continue. At least we don't pretend to know. The perception of most folks changes, depending upon when you ask this question. If the market has been up mostly in the last week or ten days and touched new highs, the answer would be highly optimistic. However, if the same question was asked after a big drop over a couple of days, half of the folks would waiver in their answer. Suddenly they would not be so sure and all the worries like rising interest rates, inflation concerns, late cycle in the bull market, geopolitical and trade issues, would come to the forefront that could derail the bull market.

However, in our opinion, you should ask a simple question to yourself and try to answer honestly. Do you care more for the wonderful gains that may lie in the future or are you more worried and restless to preserve your financial assets? Normally, there is no simple yes

This article was written by

High-income, lower-risk portfolios suited for income-seeking investors.

I am an individual investor, an SA Author/Contributor, and manage the “High Income DIY (HIDIY)” SA-Marketplace service. However, I am not a Financial Advisor. I have been investing for the last 25 years and consider myself an experienced investor. I share my experiences on SA by way of writing three or four articles a month as well as my portfolio strategies. You could also visit my website “FinanciallyFreeInvestor.com” for additional information.

I focus on investing in dividend-growing stocks with a long-term horizon. In addition to a DGI portfolio, I manage and invest in a few high-income portfolios as well as some Risk-adjusted Rotation Strategies. I believe "Passive Income" is what makes you 'Financially Free.' My personal goal is to generate at least 60-65% of my retirement income from dividends and the rest from other sources like real estate etc.

My current "long-term" long positions (DGI-dividend-paying) include ABT, ABBV, CI, JNJ, PFE, NVS, NVO, AZN, UNH, CL, CLX, UL, NSRGY, PG, KHC, TSN, ADM, MO, PM, BUD, KO, PEP, EXC, D, DEA, DEO, ENB, MCD, BAC, PRU, UPS, WMT, WBA, CVS, LOW, AAPL, IBM, CSCO, MSFT, INTC, T, VZ, VOD, CVX, XOM, VLO, ABB, ITW, MMM, LMT, LYB, RIO, O, NNN, WPC, TLT.

My High-Income CEF/BDC/REIT positions include:

ARCC, ARDC, GBDC, NRZ, AWF, CHI, DNP, EVT, FFC, GOF, HQH, HTA, IIF, IFN, HYB, JPC, JPS, JRI, LGI, KYN, MAIN, NBB, NLY, OHI, PDI, PCM, PTY, RFI, RNP, RQI, STAG, STK, USA, UTF, UTG, BST, CET, VTR.

In addition to my long-term positions, I use several "Rotational" risk-adjusted portfolios, where positions are traded/rotated on a monthly basis. Besides, at times, I use "Options" to generate income. I am also invested in a small growth-oriented Fin/Tech portfolio (NFLX, PYPL, GOOGL, AAPL, JPM, AMGN, BMY, MSFT, TSLA, MA, V, FB, AMZN, BABA, SQ, ARKK). From time to time, I may also own other stocks for trading purposes, which I do not consider long-term (currently own AVB, MAA, BX, BXMT, CPT, MPW, DAL, DWX, FAGIX, SBUX, RWX, ALC). I may use some experimental portfolios or mimic some portfolios (10-Bagger and Deep Value) from my HIDIY Marketplace service, which are not part of my long-term holdings. Thank you for reading.




Disclosure: I am/we are long ABT, ABBV, JNJ, PFE, NVS, NVO, CL, CLX, GIS, UL, NSRGY, PG, KHC, ADM, MO, PM, BUD, KO, PEP, D, DEA, DEO, ENB, MCD, WMT, WBA, CVS, LOW, CSCO, MSFT, INTC, T, VZ, VOD, CVX, XOM, VLO, ABB, ITW, MMM, HCP, HTA, O, OHI, VTR, NNN, STAG, WPC, MAIN, NLY, ARCC, DNP, GOF, PCI, PDI, PFF, RFI, RNP, STK, UTF, EVT, FFC, HQH, KYN, NMZ, NBB, JPS, JPC, TLT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (109)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.