The past trading week has given investors a nice dose of volatility after seeing the markets rally despite inflation fears. However, those fears have to seem to be creeping back into the market with recent sell-offs, which can be mitigated with a multi-asset strategy.
However, the volatility could be short-lived. In the meantime, Russia’s invasion of Ukraine and continuing inflation fears could keep investors in the fear zone.
“The charts as interpreted by Mark Sebastian say we’re currently in the middle of a short-term volatility spike, and once it’s over, we’re going to return to the post-March bottom environment where stocks can easily go higher,” said “Mad Money” host Jim Cramer.
“Because the volatility index reflects fear, it’s normal for it and the S&P to move in opposite directions,” Cramer added. “It’s when they move in the same direction that you have to start asking questions about the sustainability of the market’s trajectory.”
3 Multi-Asset ETFs to Help Reduce Volatility
A multi-asset strategy can keep investors from being too over-concentrated in equities. Rather than take on multiple positions in various asset classes, investors can opt for the following:
Invesco Balanced Multi-Asset Allocation ETF (PSMB ): PSMB seeks to achieve its investment objective by allocating its assets using a balanced investment style that seeks to maximize the benefits of diversification, which focuses on investing a portion of fund assets both in underlying ETFs that invest in fixed income securities as well as in underlying ETFs that invest primarily in equity securities. The fund’s target allocation is to invest approximately 45%-75% of its total assets in equity ETFs and approximately 25%-55% of its total assets in fixed income ETFs.
Invesco Conservative Multi-Asset Allocation ETF (PSMC ): PSMC seeks a total return consistent with a lower level of risk relative to the broad stock market. The fund aims to achieve its investment objective by allocating its assets using a conservative investment style that seeks to maximize diversification benefits, which focuses on investing a greater portion of fund assets in fixed income ETFs and provides some exposure to underlying ETFs that invest primarily in equity ETFs. Specifically, the fund’s target allocation is to invest approximately 5%-35% of its total assets in equity ETFs and approximately 65%-95% of its total assets in fixed income ETFs.
Invesco Growth Multi-Asset Allocation ETF (PSMG ): PSMG seeks long-term capital appreciation by allocating through a growth investment style that seeks to maximize diversification potential. In essence, PSMG is a “fund of funds,” meaning that it invests its assets in the shares of other ETFs instead of securities of individual companies.
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