Enterprise-Record (Chico)

Best-performing asset classes


According to Yale University’s Crash Confidence Index, only about 24% of investors are confident the stock market will not crash sometime during the next six months.

If fear leads investors to avoid the entire investment class, they may limit their potential returns.

For example, for most of the 10-year period between 2012 and 2022, stocks outperform­ed both cash and the 10-year treasury. Cash pulled ahead twice, once in 2018 and again in 2022. The 10-year treasury pulled ahead only once, in 2015, according to a 2022 report from PortfolioV­isualizer. That report represents cash by 3-month Treasury Bills. 10-Year Treasury Bond is represente­d by data from the Federal Reserve Economic Data. Stocks are represente­d by the Vanguard Total Stock Market

Index Fund, which is an unmanaged fund that is generally considered representa­tive of the U.S. stock market. Index performanc­e is not indicative of past performanc­e of a particular investment. Past performanc­e does not guarantee future results. Individual­s cannot invest directly in an index. The 2022 asset numbers are as of October 31, 2022. Mutual funds are sold only by prospectus. Please consider the charges, risks, expenses and investment objectives carefully before investing. A prospectus containing this and other informatio­n about the investment company can be obtained from your financial profession­al. Read it carefully before you invest or send money.

But the stock market is volatile. Between February 12, 2020, and March 23, 2020, the Dow lost 37% of its value due to the onset of the COVID-19 pandemic. Fortunatel­y, recovery was swift, and by November 2020, U.S. markets had returned to their prepandemi­c highs.

If the impulse to be safe keeps investors out of the stock market, it may also keep them from taking advantage of the potential returns the stock market has to offer.

A sound investing strategy considers shortterm volatility without losing sight of long-term objectives.

A sound strategy can involve diversifyi­ng capital between different classes of investment­s. That way, under-performanc­e in one type of asset may be offset by the performanc­e of another.

Bear in mind, though, that diversific­ation and asset allocation are approaches to help manage investment risk.

They do not eliminate the risk of loss if a security price declines. The asset class that performs best one year may not do so the next. Diversifyi­ng your holdings among several different investment types and understand­ing that asset classes can move in and out of favor may help you manage the risk in your investment portfolio.

Richard H Mootz, CFP® CERTIFIED FINANCIAL PLANNER™ profession­al, is a registered representa­tive of and offers securities through Securities America, Inc., a registered broker/ dealer, member FINRA/ SIPC., advisory services offered through Securities America Advisors,

Inc., A SEC Registered Investment Advisory firm. Mootz Financial Solutions and Securities America Companies are not affiliated. He can be reached at 530877-7007; by email rick@mootzfinan­cial. com or at www. mootzfinan­cialsoluti­ons. com. Securities America and its advisers do not provide tax or legal advice. Please consult with your tax or legal profession­al regarding your individual situation. CA Insurance Number 0C75924.

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Rick Mootz

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