Investment Opportunities

10 Stock Alternatives to Help Protect Your Portfolio in 2020

Most novice investors focus only on stocks, stocks and more stocks.

But there are actually five principal types of long-term investments: stocks, bonds, real estate, precious metals and the catchall, cash.

Every investor’s needs are different. So there’s no perfect mix everyone should subscribe to. But we do have standards to help us get started.

For example, investors looking forward five to 10 years or more should consider something along the lines of…

  • 60% stocks
  • 20% bonds
  • 10% cash/Treasurys
  • 5% precious metals
  • 5% real estate.

Each investor will have their personal tweaks and touches, accounting for their risk tolerance and needs.

But the most important takeaway here is that diversification is key.

That’s why, for today’s Making the Grade, I’m providing a list of 10 exchange-traded funds (ETFs) to help investors diversify their portfolios, reduce their overall volatility and potentially increase their returns in 2020.

10 Plays to Diversify

We live in the golden age of investing.

Never before have trading costs been so cheap and the amount of information available to investors so enormous.

On top of that, ETFs offer access to not only baskets of companies in a specific industry but also strategies once available only at pricey hedge funds.

In the spirit of diversifying your portfolio, you don’t want to put all your eggs in one basket.

That’s why these 10 ETFs will help you be less of a basket case in 2020…

Chart - 1-Year Return of Diversification ETF

Over the past year, the Grayscale Bitcoin Trust (OTC: GBTC), has more than tripled the performance of the Dow Jones Industrial Average.

It’s up 85% since January 2019. Though, that’s down significantly from the 250% gain it sported in July.

Since its inception, the trust has been one of my favorite ways to trade “digital gold” and hold it long-term. It can be held in tax-advantaged accounts, such as IRAs or Roth IRAs.

The U.S. Diversified Real Estate ETF (NYSE: PPTY) is up nearly 25% over the past year. The ETF holds a variety of apartment, industrial, office and retail through a combination of real estate investment trusts (REITs) and property managers.

SPDR Gold Shares (NYSE: GLD) and the iShares Silver Trust (NYSE: SLV) are staple precious metals holdings.

As we can see, both have posted solid gains over the last 12 months. Uncertainty tends to be bullish for gold, silver and other precious metals.

Then we have market-neutral strategy ETFs like the AGFiQ U.S. Market Neutral Anti-Beta Fund (NYSE: BTAL) and the First Trust Long/Short Equity ETF (NYSE: FTLS).

The AGFiQ fund goes long low-beta stocks and, at the same time, short high-beta stocks. So any time high-beta stocks (like tech) crash and low-beta outperforms, the ETF surges. It’s seen as a possible effective alternative to Treasurys or volatility products.

The First Trust ETF is similar. It’s long Apple (Nasdaq: AAPL), Amgen (Nasdaq: AMGN), Bank of America (NYSE: BAC) and others, while it’s short the SPDR S&P 500 ETF Trust (NYSE: SPY), Citigroup (NYSE: C), Texas Instruments (Nasdaq: TXN) and more.

Then there are ETFs like the IQ Hedge Multi-Strategy Tracker ETF (NYSE: QAI) and the First Trust Multi-Asset Diversified Income Index Fund (Nasdaq: MDIV).

The IQ ETF is a “fund of funds.” It holds several corporate and government bond ETFs, including the iShares Short Treasury Bond ETF (Nasdaq: SHV).

Meanwhile, the First Trust fund delivers on what it advertises. It offers 20% equities, 20% REITs, 20% high-yield corporate debt, 19.6% preferred securities and 18.5% master limited partnerships.

Be Prepared for the Year Ahead

I expect a year of both heightened greed and fear.

But the easiest way to avoid being a basket case in 2020 is to not have all your eggs in one basket.

Spread the wealth into alternative assets – precious metals, real estate, bonds… even cryptocurrencies.

Or consider adding some market-neutral strategies that are designed to leverage long and short strategies to grind out gains.

The bottom line is you can’t be 100% in U.S. equities. You need to be diversified. Not just for a healthy portfolio, but for your mental health as well.

Here’s to high returns,

Matthew


About

Matthew’s expertise ranges from classic industries such as oil and mining to cutting-edge markets like small cap tech, cannabis, 3D printing and cloud computing. With almost two decades of financial experience under his belt, Matthew’s knack for finding market trends never fails to surprise us, which is why we keep a close eye on his free e-letter, Profit Trends.

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