The Motley Fool

How to bulletproof your portfolio for 2018

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Thanks to their tendency of outperforming every other asset over the long term, we can be fairly confident in our predictions about where equity markets will be 10, 20 or 30 years from now. Next year? Well, that’s a far more difficult — some would say utterly futile — exercise.

Nevertheless, the fact that no one really knows where we’re headed over the short term doesn’t mean that investors can’t take action to ensure they can meet any seismic events with something approaching indifference.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The best way of bulletproofing your share portfolio for 2018? Yes — you’ve guessed it — diversification.

Safety in numbers

For those who prefer to err on the side of caution, can’t follow day-to-day market movements, or have little interest in investing beyond recognising that it’s a great way of growing their wealth, exposure to a variety of stocks makes a whole lot of sense.

One way of diversifying your holdings is through geography — something definitely worth considering with Brexit on the horizon.

Black swan events aside, the important thing to realise is that not all stock markets behave the same. Moreover, the worst performing market one year is often (but not always) one of the best performers in the following year. Emerging markets, for example, lagged pretty much everything else in 2008. In 2009, they were the top performing sector. Exactly the same pattern occurred in 2015 and 2016.

So rather than attempt to predict which will perform best in any one year, it’s worth having exposure to a number of markets. Perhaps the most convenient, cost-effective and least risky way of achieving this is to buy a group of exchange-traded funds or, alternatively, a single global tracker that assigns different amounts of your capital to different areas.

Having made sure that you’re not totally reliant on UK plc, another consideration, as far as equities are concerned, relates to sector diversification. This is important given that some parts of a single market will perform better than others depending on where in the economic cycle we happen to be.

Buying a bunch of housebuilders and very little else is flirting with disaster, particularly if the housing market takes a dive. The same goes for retailers if consumer spending shows signs of slowing. A portfolio composed just of oil stocks won’t do you any favours if the price of black gold tanks like it did a couple of years ago. You get the idea. 

A housebuilder, a consumer goods stalwart, a bank, an energy giant, a miner, a pharmaceutical or two, an engineer, a few tech-related stocks? Now we’re talking.  

One last aspect of diversification worth considering is your approach to investing.

Some market participants like to rigidly adhere to a particular strategy, labelling themselves as growth hunters or small-cap specialists. To muddy the waters, some will label themselves as small-cap growth investors.

Not only is this tendency unnecessary, it’s also potentially bad for your wealth given that certain strategies perform better than others at different times (growth-focused stocks have trumped those offering value in recent years).  As such, those looking for a smoother ride to riches should consider having a mixture of different kinds of companies (large, small, undervalued, new, established) in their portfolios. While less exciting than finding the next Amazon or Apple, your returns should be far more consistent. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.