February 2019 – 3 in 3
This month, Jason Weaver discusses the barbell strategy, minimum volatility and treasuries. If you would like to subscribe to our monthly 3 in 3 videos, visit our YouTube channel below. At Weaver Consulting Group we’ve come to know through our clients that they like to stay informed about the economy and markets. This is why we’ve come up with “3 in 3.”
3 in 3 is a monthly video series centered around three current market themes for the month with their accompanying data points. At Weaver Consulting Group it’s our goal to provide the maximum amount of value to you and your family. We hope this helps you feel more informed. Which allows you to be more confident, so that you may find yourself inspired and worry free in retirement!
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 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 stocks 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, a stock market like 2018 was extremely volatile. Typically, you’re going to get less of a valley or peak, and over a period of time when there’s a lot of volatility, those stocks will outperform because the highs are not as high, and the lows are not as low. That also 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 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. Additionally, if Fed. Fund Rate rises, 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.
February 2019 – 3 in 3