Use This Strategy to “De-Risk” Your Portfolio

You did your research on a stock, commodity, exchange-traded fund (ETF), or mutual fund.

You bought it… and then watched it go down.

Meanwhile, something you didn't buy went up.

Your thesis on what you bought could be entirely correct. Yet you may lose money for reasons that are totally out of your control.

It happens. But if it happens a lot, the reason could be that you are investing in the wrong "factors."

Get the Factors Right

When most people buy stocks, they find cheap ones and wonder why their trades don't work.

That's because they have no idea that the market is broken down into a bunch of factors—groups of stocks with the same characteristics.

Growth and value are factors. So is momentum. Low volatility is also a factor.

When you pick stocks, you have to get the factors right. Once you do that, you will start to see your stocks rise… even if the market dips.

Invest Thematically

Last week, I talked about how people often make the mistake of building a portfolio from the bottom up. To reiterate, you will have much more success with a top-down approach—start with the asset allocation you want, and fill out specific investments from there.

Looking at the market on a top-down basis means you must invest thematically. I look at the world in a top-down fashion.

Most of you know that I was an ETF trader, so I was trading sectors and styles and countries. I still like to target ETFs—in fact, it’s the focus of my premium Strategic Portfolio letter, which is designed to help you build a solid portfolio that can withstand market pressures.

One of my other letters, Street Freak, takes a more aggressive stock-picking approach. I also write The Daily Dirtnap, my morning newsletter that’s all about helping readers become informed, well-rounded investors.

When you combine all three—my Strategic Portfolio, Street Freak, and The Daily Dirtnap—you get what I find to be a balanced approach for sustainable growth and stability.

I’m all for minimizing stress when it comes to your investment and retirement goals. That’s why it’s so important to de-risk your investments.

In my recent sit-down with my friend and colleague Ed D’Agostino, we discuss how you can de-risk your portfolio, invest with peace of mind, and tap into market psychology to reach your goals.

You can watch it by clicking the “play” button below:

And thank you to everyone who submitted questions last week! I was able to address several of them in my talk with Ed.

Jared Dillian