This month, Jason Weaver discusses the barbell strategy, minimum volatility and treasuries.
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Welcome everyone, my name is Jason Weaver. I am the managing partner with Weaver Consulting Group. A local Registered Investment Advisor practice here in Huntington Beach, California. Thank you for joining us for 3 in 3. Today, we are going to be talking about our barbell strategy, minimum volatility and treasury bonds. Our Barbell Strategy Also, a barbell strategy is when you have assets on both sides of the spectrum. In addition, you have your risk assets and your risk off assets, and there’s nothing really in between. Therefore, we typically use this portfolio strategy when we expect potentially more volatility or some type of crash of some sort. Next, you have your safe assets on one side, which again typically include short term treasury bonds, cash and CDs. On the other side are your risk assets, stocks and growth positions. In the middle, you really have nothing. You would be avoiding high yield bonds or something of that sort. Minimum Volatility Therefore, minimum volatility stocks typically try to get some type of stock market return similar to like the S&P 500 with potentially less risk. Typically, they’ll put those baskets together and these are baskets that typically include stocks that have more stable prices. Like your health care stocks, utilities or again consumer staples. As you see on a stock market like 2018 was extremely volatile. And you follow the pink line which is the minimum volatility stocks. Compare that against the orange line to the S&P 500. Typically, you’re going to get less of a valley and again, less of a peak, and over a period of time when there’s a lot of volatility like you’re seeing here usually those stocks will outperform because the highs are not as high, and the lows are not as low. Also, that happened in 2018. Therefore, we are not sure what’s going to happen in 2019, but if we start experiencing that volatility again, this would be a great strategy to implore in your portfolio. Treasuries Finally, Treasuries again are typically called government securities. Traditionally, they’re backed in full faith in credit of the US Government. They can raise taxes in order to pay that debt. Also, they are a great security to use in volatile periods of time. Or when you are nervous about the stock market. Finally, as you are looking at it here, this is a little bit confusing but follow the line down here, which is looking at the Fed. Fund Rate. Additionally, the Fed. Fund Rate does is if they raise that rate, short term treasury bonds start paying more interest. And as you can see, short term treasury bonds in comparison to a 10-year or 30-year treasury bond have about 80-90% of the yield of those long term securities. Most importantly, now might be a great time to start using short term treasury bonds as a risk off asset in your portfolio. Thank you again for joining us. Next time, join us in April.