The Search for Positive Returns during a Market Meltdown

Year 2018 has been a negative year for most asset classes. The last time this occurred has been decades as typically some asset classes are used to hedge against the general equities market but this has not been the case this year. Below is a snapshot of the YTD total returns performance of some indexes including the equities, bond, and commodities markets.

                                                   YTD Total Return as of 12/21/2018
Recently, pundits have argued that “cash is king” and it is easy to see why based on the plot above. The general equities market have under-performed and bonds have not done that much better either. Municipal Bonds, however, has done relatively better especially as a fixed income asset class. I am a huge fan of municipal bonds as it provides some stability to the equities market especially if held till maturity. Excellent credit rated and insured municipal bonds can be found and purchased. A major benefit of most municipal bonds is that it generates tax-free income.
During such volatile periods in the market, it is imperative that investors stay calm and avoid making costly mistakes. Sometimes, a shift in mindset and strategy is needed to be able to counter-balance the equities market. Municipal bonds and low volatility vehicles could possible provide this balance. I recommend Robert Kiyosaki’s Rich Dad, Poor Dad which is my favorite financial book that touches on generating income and making that income work for you. Historically, bonds and bond funds have been used to hedge against the stock market and they can be purchased for free on the M1 Finance platform. Periods of rising interest rate do impact the returns realized on bonds and it is important to be aware of such market conditions.
Savings accounts and Certificate of Deposits as an asset class have also done better than the equities market this year in general. Savings and CD Rates upwards of 2% can be found online these days. Now till December 31, 2018, you can open an HSBC savings account and earn interest as well as an account bonus using the referral code (S014039187).
The real estate industry has also been used to diversify an investment portfolio. During volatile times, I usually recommend rental income as a source of income especially when houses do not appreciate as much during downturns. To get started earning passive income in the real estate industry, I recommend Fundrise as you can start investing for as low as $500. You can read about my review of Fundrise here and how it can be used to generate passive income.

Final Verdict
Being able to generate positive returns in Year 2018 has been difficult for most investors. It is important to be properly diversified and aware of market conditions and the different asset classes available. It is up to you, the investor, to allocate across where you believe the best returns will be and what you deem as the best mix for your portfolio going forward.


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