The Smartest Way to Invest

The Smartest Way to Invest

Everyone and their mother knows you need to diversify.

This isn't an insight. It's a platitude or an empty-hand wave to prove that you talked about the risks in an investment. It's an admonition akin to "eat your vegetables"... acknowledging the wiser action without changing anyone's behavior.

We know we need to diversify, but we don't.

That's partly because diversification is a bit boring and it's more fun to go for the big score.

But it's also because diversification is difficult to implement... Diversifying properly involves understanding correlations that vary across time between assets with shifting categorizations. This is an area that human minds – even those of accomplished statisticians – can't fully understand.

Do you diversify across stocks and bonds? Growth and value? Cyclical and acyclical? Reopening business and work-from-home? Of course, you can diversify by sector, industry, size, and other features as well.

So instead of "eat your vegetables," giving someone advice to diversify is more like telling them to "eat healthy." Sure, I'd like to... But how?

I will always advocate for you to diversify your assets, no matter what the current market climate is.

It's the smart and prudent thing to do.

And right now, we're definitely in a market climate that calls for smart diversification. That's why I just released three new special reports for my Retirement Millionaire subscribers that reveal...

If you want to learn more about these reports and how to tap into a corner of the market which could soar higher than the S&P 500 Index, click here.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team
March 25, 2023

Reader question of the week...

Q: I'm holding stock shares that haven't moved much in the past year, and right now they're slightly down. Could I sell covered calls to collect some extra income? – L.S.

A: That depends on the stock and what your outlook is.

With a covered call, you're selling someone the right to buy your shares at a given price. It's the strategy I use in my Retirement Trader service.

But while covered calls are an incredible way to generate income and lower your cost basis – because the money you collect by selling a call effectively reduces the total amount you spent to own the stock – you give up some of your upside if the stock soars.

So if this is a biotech company that would rise 50% if its new drug gets approved or a deep-value play that you think is worth double its current market price, then selling calls makes little sense. You're working at odds to the reason you're holding the stock.

If this is a steady, mature company that pays a dividend and is closer to a reasonable valuation, then selling calls could be great to take advantage of the languishing that your stock seems to be doing.

Keep sending your questions, comments, and suggestions our way. We read every e-mail... feedback@healthandwealthbulletin.com.