February 20, 2025

How to Protect Your Wealth in a Volatile Economy

We're all paying close attention to the markets right now, and for good reason. Economic uncertainty, inflation, and global events have made volatility the new normal. So, the big question is: How do we protect our wealth while positioning ourselves for long-term success?

At Duncan Williams Asset Management, we help investors like you navigate uncertain markets with diversification and risk management strategies—two critical tools for preserving capital and managing risk.

Diversification: Your First Line of Defense and Key to Security

Let's start with diversification. You've probably heard the phrase, "Don't put all your eggs in one basket." But investing is not just about having multiple baskets—it's about having the correct baskets.

Key Diversification Strategies

• Asset Class Diversification: Holding a mix of stocks, bonds, real estate, and alternative investments can help spread risk. Historically, bonds provide stability when stocks decline (Source: Morningstar).

• Geographic Diversification: Investing in global markets reduces reliance on one economy. While the U.S. market dominates, international exposure can provide additional opportunities (Source: MSCI World Index).

• Sector Diversification: Not all industries move in sync. A balanced portfolio with technology, healthcare, consumer staples, and energy exposure helps mitigate sector-specific downturns (Source: S&P 500 Sector Performance).

• Alternative Investments: Commodities like gold, private equity in startups, and hedge funds can act as portfolio stabilizers, offering returns that don't necessarily follow stock market trends (Source: CFA Institute).

Diversification helps, but it's not foolproof. That's where risk management comes in.

Risk Management: Protecting Your Portfolio from Uncertainty

In a volatile market, your ability to manage risk can mean the difference between weathering the storm and taking unnecessary losses.

1. Maintain a Balanced Asset Allocation

Your portfolio should be aligned with your risk tolerance and long-term goals. Studies show that a well-diversified asset allocation can reduce downside risk while capturing growth (Source: Vanguard Research).

2. Use Stop-Loss Orders

A stop-loss order can protect you from extreme losses by automatically selling a stock if it drops to a specific price. This strategy helps remove emotion from investing (Source: Investopedia).

3. Consider Hedging Strategies

Options, futures, and other hedging tools can provide downside protection while keeping you invested in the market (Source: Options Industry Council).

4. Keep a Cash Reserve

Market downturns are less stressful when you have cash on hand. A six- to twelve-month emergency fund allows you to stay invested without being forced to sell during a dip (Source: Federal Reserve Bank).

5. Rebalance Your Portfolio Regularly

Over time, market movements shift your portfolio's balance. Rebalancing ensures that your risk exposure stays aligned with your strategy (Source: JP Morgan Asset Management).

Avoid Emotional Investing

One of the most significant risks in volatile markets isn't external—it's internal. Fear and greed drive poor decisions. Trying to time the market often leads to missing out on key recovery periods. Studies show that investors who react emotionally to market swings tend to underperform those who stay disciplined (Source: Dalbar Study on Investor Behavior).

Final Thoughts

So, what's the key takeaway? A diversified, risk-managed approach is your best defense in a volatile economy. At Duncan Williams Asset Management, the right strategy can help you navigate uncertainty while keeping your financial goals on track.

Let's talk if you'd like to discuss how to strengthen your portfolio. We’re here to help you make informed decisions that align with your long-term vision.

Disclosures:

This presentation is for informational purposes only and does not constitute financial, legal, or investment advice. Investing involves risk, including possible loss of principal. Diversification does not guarantee profit or protect against loss. Past performance is not indicative of future results. Please consult a qualified financial professional before making investment decisions.

Sources

Morningstar: Asset Class Diversification

https://www.morningstar.com/lp/guide-to-asset-allocation

MSCI World Index: Global Market Diversification

https://www.msci.com/our-solutions/indexes/msci-world-index

S&P 500 Sector Performance: Sector Diversification

https://www.spglobal.com/spdji/en/indices/equity/sp-500/#overview

CFA Institute: Alternative Investments & Investment Education

https://www.cfainstitute.org/en/research/foundation/alternative-investments

Vanguard Research: Asset Allocation & Diversification Studies

https://investor.vanguard.com/investing/portfolio-management

Investopedia: Stop-Loss Orders & Investment Strategies