#5 Reduce Cash Holdings
Cash can be used as a short-term hiding spot from the sale of an asset or shelter from the storm. However, hiding out in cash for an extended period of time can significantly hurt your returns because it is paying next to nothing. This is especially true when asset prices are continuing to trade well this year.
If you have a high cash position, you should put that money to work in areas that will allow you achieve your income and growth goals. Even a short-term bond fund can produce a modest monthly income stream without taking excessive risk.
Consider pairing equity, fixed-income, or even alternative asset strategies to balance your portfolio and mitigate specific risks in any one asset class. This can help smooth out volatility and increase your total return over time.
The Bottom Line
Income investors have faced a number of unique opportunities and risks over the last year which has required flexibility to adapt as conditions change. Fortunately there are a number of excellent choices available through exchange traded funds to access specific themes and avoid potential obstacles. I recently discussed a variety of correlations and opportunities in this video presentation that point out specific trends we are monitoring moving forward.
David Fabian is Managing Partner and Chief Operations Officer of FMD Capital Management. As of this writing, he did not hold a position in any of the aforementioned securities.
Learn More: Why I love ETFs, And You Should Too