As an expert in the finance industry, I am often asked for advice on how to invest significant sums of money. Today, I will share my insights on how I would invest $2.5 million in the current market climate. Please note that every investor’s situation is unique, and my personal choices may not be suitable for everyone. However, I believe that these strategies can provide valuable guidance for financial news consumers and investors looking for market analysis and commentary online.
Understanding the Macro Environment
Before diving into investment recommendations, it is crucial to assess the current macroeconomic landscape. At present, there is a 93% probability of a recession occurring in 2024, which significantly impacts investment decisions.
Protecting Against a Market Downturn
Given the likelihood of an upcoming recession and my family’s personal circumstances, I would allocate 50% of the portfolio to bonds. This cautious approach helps protect against potential losses during a market downturn. It is essential to plan for worst-case scenarios and avoid becoming a forced seller in a market panic.
The Benefits of Managed Futures
To further hedge against market volatility, I would invest in managed futures. Combining managed futures with bonds has historically proven to be an effective hedging strategy. Managed futures tend to perform well during periods of economic uncertainty, making them an attractive addition to the portfolio.
Recommended Managed Futures ETF
Among the various managed futures options, I highly recommend the KFA Mount Lucas Index Strategy ETF (KMLM). Backed by a solid track record, KMLM has consistently delivered above-average returns since its inception in January 2021. Its superior strategy and low expenses make it the gold standard in managed futures funds.
Building a Diversified Portfolio
When considering investments outside of bonds and managed futures, it is essential to maintain a diversified portfolio. I would allocate a significant portion to ETFs, focusing on core ETFs for stable long-term holdings and strategy ETFs for their potential growth. Some of the recommended ETFs include Schwab U.S. Dividend Equity ETF (SCHD), VanEck Morningstar Wide Moat ETF (MOAT), Victoryshares Free Cash Flow ETF (VFLO), Pacer US Cash Cows 100 ETF (COWZ), and Cambria Shareholder Yield ETF (SYLD).
Long-Term Financial Goals
While these recommendations are specific to my family’s situation, they reflect our long-term financial goals. The portfolio is designed to generate a yield of 4.2% and a growth consensus of 9.5%, resulting in a long-term return potential of 13.7%. The discounted valuation and favorable forward PE ratio make it an attractive choice for achieving our target returns.
Remembering the Importance of Adaptability
Investing is not just about numbers and strategies; it is also about adapting to unexpected challenges. Life is full of uncertainties, and investing is no different. It is crucial to focus on safety, quality, prudent valuation, and risk management.
In addition to financial considerations, finding joy in everyday life is equally important. Despite the challenges we face, it is essential to appreciate the things that truly matter: family, friends, faith, good health, and a positive outlook. By incorporating these values into your investment strategy, you can achieve long-term success and make a positive impact on the world.
