Investment Diversification Techniques

For 20 years, investors lived off a gift. When stocks fell, bonds rallied. The “golden relationship” made 60/40 feel bulletproof. But that was luck, not law. In the 1970s and 1980s, stocks and bonds sank together. Bonds didn’t hedge—they hurt. Today feels closer to that world. Inflation shocks, weak policy credibility, and supply risks flip the math. When inflation dominates growth, stocks and bonds move the same way. The chart says it all: if stock–bond correlation shifts from –0.5 to +0.5, portfolio volatility jumps ~20%. Downside risk rises nearly 30%. To hold risk steady, equity allocations would need to be cut—taking return potential down too. Here’s the friction: diversification isn’t free anymore. 60/40 is creaking. Bonds don’t guarantee protection when inflation bites. Commodities, liquid alts, and smarter style exposures matter more. Energy and industrials fight inflation. Utilities and staples don’t. Ignore this, and portfolios carry hidden concentration risk. Bottom line: the golden relationship isn’t dead—but it’s fragile. Fragility isn’t a strategy. Would you cut equity to preserve risk if correlation flips? Do you see commodities as core allocation or just hedge? If bonds fail to hedge equities, what’s the third pillar? How do you stress-test for stocks and bonds both down? For more see our Nomura CIO Corner: https://lnkd.in/e4TCax_g #Diversification #Stocks #Bonds #Alternatives #Commodities #Macro #Nomura #CIO #Markets

Advanced Hedging: Tackling Parallel, Non-Parallel, and Multiple Shocks I am thrilled to share this video with you all! It is the culmination of years of hands-on experience in managing complex hedging strategies, drawn directly from my time in the trenches of banking and treasury. In this video, I dive deep into advanced hedging techniques, including how to hedge against: - Parallel shocks - Non-parallel shocks - Multiple shocks occurring simultaneously These are not textbook strategies – they are my own, developed and refined through practical application. It is a blend of theoretical knowledge and real-world experience that I have lived and breathed over the years. For anyone working in treasury, ALM, or balance sheet management, this is designed to add real value by showing you actionable strategies to manage volatility effectively and prudently. Whether you are preparing for a rate environment shift or managing basis risk, this content is crafted to help you think strategically about hedging in a way that is both realistic and achievable. Let me know your thoughts or any questions in the comments! I am eager to hear how this resonates with your own experience in hedging.

Just because stocks have a higher return than an unlevered bond index doesn't mean that an all stock portfolio is better. Arguing for a 100% stock portfolio is at best imprudent & self defeating and at worst significantly increases the risk savers have unacceptable outcomes. There is no reason to have to have an all stock portfolio to generate equity like returns. These academics just assume bond returns are lower than stocks. But that's not inherent to bonds, its because the bond index is a whole lot less volatile than stocks and because of that bonds structurally have lower excess returns. There are lots of ways that investors can *achieve the same returns as stocks* but have much better diversification. For instance, by using futures contracts or holding long-duration bonds to create bond exposure with similar volatility as stocks, then bonds investors can get returns that are of similar expected return vs. cash. Even a few simple steps can significantly improve diversification while keeping equity like returns (like the link below): https://lnkd.in/ep2hs8q4 There are even many easy ways to do this today that don't involve having to put the portfolio together yourself. Damien Bisserier's $RPAR and $UPAR offers investors *balanced* beta exposure at different levels of expected return. Corey Hoffstein's return stacking structures allow investors to get more cash efficient exposures. WisdomTree Asset Management's $GDE is an efficient way to access to gold and stocks. These are just many of the pieces investors can use to build high-returning, cash efficient portfolios. The reason why this diversification is so important is because *the path matters.* A lot. Savers don't just chuck money in their 401k or brokerage accounts and say bon voyage till retirement (as is assumed in the paper). Things change and changes draw on savings. People go to school, get married, they buy a car, house, have a baby, their kids go to school, etc. Savings is there for all those steps and since the timing isn't precisely known, the path matters. Imagine being a saver in 03 or 09 when stocks were down hugely and the savings you thought you had evaporated. The paper says wait it out, but that is often not realistic. Further there is a behavioral aspect. The paper just assumes that investors will 'ride out' any losses. Not care, not panic, not sell. But any advisor knows that's totally unrealistic. Its been well proven investors sell at bad times and buy at bad times too. An all stock portfolio fails to recognize these realities of human behavior. I'm all in favor of challenging the status quo but this is a step backward, not forward. The last thing we need is for investors to load up on stocks when they are at the highest levels relative to balance assets in decades. https://lnkd.in/e5YqjHcg

A hedge that could prove to be attractive for a portfolio overly dependent on positive economic outcomes could be to short junk bonds. Currently, spreads between high yield debt and investment grade debt are at levels that suggest very little chance of elevated default risk ahead. However, as can be seen below, whenever a recession does ultimately occur, high yield spreads tend to widen quite significantly and rapidly. Allocating a portion of one’s portfolio to being short high yield corporate debt could serve as a buffer if a recession occurs in 2024.

🚨 Tokenomics Deep Dive: What Every Crypto Investor Must Know 🚨 In a crypto market defined by volatility, understanding tokenomics has become essential for survival. As altcoins rise and fall dramatically, knowing how to evaluate them is crucial. Based on Binance Research’s latest report, here's your guide to avoiding pitfalls and identifying promising projects: --- 🔑 The 3 Pillars of Sound Tokenomics 1️⃣ Supply Discipline - Vesting schedules matter: Short lockup periods for insiders (teams/VCs) are a red flag. Leading Layer-1 platforms like Avalanche and NEAR demonstrate better *long-term alignment* with extended vesting periods. - FDV vs. Market Cap: Tokens with high fully diluted value relative to market cap (like Serum's 38x FDV ratio) pose significant risks. Monitor emission schedules carefully. 2️⃣ Demand Drivers - Real utility > Hype: Successful tokens solve real problems. For example, Chainlink's oracle payments and Curve's veCRV for governance and fees create *organic demand*. - Revenue Sharing: Strong protocols like SushiSwap share fees with holders (16.7%). Be wary of projects without clear revenue models. 3️⃣ Governance That Works - DAOs requiring "skin in the game" through veToken lockups perform better than simple "one coin, one vote" systems. Watch for centralization risks—when whales control over 50% of votes (as with Convex), true decentralization is compromised. --- 🚩 Red Flags for Retail Investors - Airdrop Farmers: Leading projects like Optimism and Hop Protocol use Sybil-resistant measures. Be skeptical of tokens that seem *too easy* to acquire. - Infinite Inflation: Extremely high APY farms (such as OlympusDAO's 8000% APY) resemble Ponzi schemes. Sustainable yields come from genuine fees, not unlimited token creation. - Two-Token Chaos: While dual-token models like Axie's SLP/AXS can work, misalignment often leads to volatility. Consider: Does each token serve a *clear, independent purpose*? --- 💡 Actionable Takeaways 1. Dig deeper than the whitepaper: Scrutinize token allocations (be cautious if ≥30% goes to insiders), vesting schedules, and burn mechanisms. 2. Focus on protocols with *recurring revenue*: While Uniswap succeeds without token rewards, platforms like Sushi and PancakeSwap share returns with holders. Understand your chosen model. 3. Beware the "VC Coin": Exercise extreme caution when FDV exceeds market cap by 10x and insider unlocks are imminent. --- The bear market serves as a stress test for tokenomics. Projects lacking strong fundamentals (particularly FDV-heavy tokens) won't survive. Those offering *real utility, aligned incentives, and transparent governance* will emerge stronger. 📈 Your move: Before investing, ask yourself: “What gives this token enduring value?”If you can't find a clear answer, look elsewhere. What do you think?👇 *Disclaimer: Not financial advise* #Tokenomics #CryptoInvesting #Blockchain #DeFi #Altcoins

I helped a retired Colonel grow his portfolio from ₹1.39 crore to ₹3.21 crore in less than 4 years. Four years ago, we had an investor come to us who was in a difficult situation. Before approaching us, he had been investing elsewhere and had suffered a substantial loss of ₹20 lakh on his retirement corpus. His portfolio at that time was valued at ₹1.39 crore, with much of his investments locked in poor quality, segregated, and frozen debt funds. His previous advisors had relied too much on poorly researched and low-quality mutual fund schemes, which was limiting his progress, especially in a market where debt funds were expected to struggle due to high interest rates. We took a comprehensive look at his portfolio and quickly identified that it required a complete restructuring. The first step we took was to clean up his portfolio and move away from a narrow and loop-sided investment strategy. We diversified his investments across multiple asset classes, including equities, mutual funds, etc., aligning everything with his long-term financial goals and risk appetite. He started with us at the end of 2020. Despite all the concerns and waves of market volatility, over the last three years, the officer's well-diversified and balanced mutual fund portfolio has delivered a compounded annual growth rate (CAGR) of 29.25%. Fast forward to today, his portfolio stands at ₹3.21 crore. It’s a significant achievement, especially considering the challenges, including his shaken confidence in the market investments we initially started with. You all must know that staying too focused on a single asset class can limit growth potential and expose you to unnecessary risks. Whereas, ‘Right asset allocation is the key to market returns.’ By diversifying and strategising, you don’t just protect your investments but significantly grow them. Share the strategy that works for you and repost if you found this insightful. #investment #personalfinance #financialplanning Disclaimer: Past performance is not an indicator for future expectations, and mutual fund investments are subjected to market risks.

Best Practices in Late-Cycle Investing: Rebalancing from Public Equities, to...? 🤔 So you’ve followed our advice. You’ve understood that maybe taking money off the table, especially from some of your high-performing US tech equities, might be acceptable despite the tax hit. You’ve also understood that there might be assets beyond public equities. But like many of the investors you’ve spoken to, you might wonder - what else is there? First, cash. Asides from a default of the bank where you hold cash in excess of amounts protected by your local deposit insurance, cash in your base currency has essentially no price risk at all - which actually makes for a great combination with volatile public equities. (Of course it’s worth noting that cash is not risk-free - in particular, it is exposed to inflation risk.) Secondly, fixed income investments. Fixed income includes any investment that has a contractually defined return profile, such as a bond or a loan. FI comes in many shapes and forms, ranging from low risk (like US treasury bonds) to more risky (think high-yield bonds issues as part of private equity buyout transactions). They also vary in geography (i.e. US, Europe, EM) and issuer (governments, companies, SPVs). Many younger investors grew up in the days of low interest rates and thus might’ve had little exposure to bonds. However, as rates have risen substantially again, bonds can be attractive additions to a diversified portfolio: Government bonds and/or IG corporate bonds might add stability while offering higher yields than cash. Structured credit or emerging markets bonds offer higher yield through ‘differentiated’ risk (i.e. structural risks of structured credit or political risk for EM bonds). Lastly, investments like high-yield bonds offer returns that can be equity-like, but of course are more risky. Third and last, commodities. There's not just gold - options range from other precious metals such as silver to industrial commodities such as gold or even livestock. While each of these commodities differs substantially in its return, they all share one common characteristic, which is that they tend to do well in times of inflation. Professionally, I grew up sceptical of commodities (my alma mater Goldman Sachs didn’t like investing directly into commodities given the negative cashflow) - but changed my mind after 2022, when ‘safe’ bonds did even worse than equities while inflation-sensitive investments like gold or other commodities ended with positive returns. So going back to our original question - there are many asset classes that can be a valid alternative and/or addition to a public equity portfolio. But as with every investment-related matter, they should be picked prudently, and in light of your other investments. It’s something we’ve done many times with our clients - so if you’re looking to diversify beyond equities, don’t hesitate - and reach out to me and my colleagues at Cape May Wealth Advisors. 😇

Everyone’s chasing the next big sector— -The underdog that will rise -The horse that will deliver steady returns -The cheetah that will run ahead of the pack But the truth is trying to perfectly time which sector will outperform is like chasing shadows. What really matters is diversification. Because a well-diversified portfolio ensures you’re not betting on just one story it lets you participate in multiple growth journeys while protecting against concentration risk. At the end of the day, wealth creation is less about predicting the winner and more about building a portfolio where all players work together for long-term growth. Don’t try to time the sector. Build resilience through diversification.

Investing in cryptocurrency goes beyond just tracking price charts and market trends. Fundamental analysis (FA) plays a crucial role in making informed investment decisions by evaluating the true value of a crypto asset. Unlike technical analysis, which focuses on price movements and patterns, fundamental analysis dives deeper into factors such as: ✅ Project Utility & Use Case – Does the crypto project solve a real-world problem? ✅ Team & Development – Who is behind the project, and do they have a strong track record? ✅ Tokenomics – How is the token supply structured? Is there a risk of inflation or manipulation? ✅ Adoption & Market Demand – Is the project gaining real users, partnerships, or institutional interest? ✅ Community & Governance – A strong and engaged community often signals long-term potential. By analyzing these elements, investors can identify solid projects, avoid hype-driven bubbles, and make better long-term investment choices. While the crypto market is volatile, fundamental analysis helps reduce risks and maximize opportunities. Are you using fundamental analysis in your crypto investments? Let’s discuss in the comments! #CryptoInvesting #FundamentalAnalysis #Blockchain

China’s 2025–2026 Metals Plan: A Wake-Up Call for Copper #China just unveiled its new Work Plan for the #NonFerrousMetals Industry — and #copper sits right at the center. This isn’t a routine update; it’s a strategic reset reshaping supply, trade, and margins across the global copper chain. 🔍 What’s Changing — and Why It Matters Beijing targets ~5 % annual growth in value-added output, while copper’s physical growth stays near 1.5 %. ➡️ More value, less volume. The plan demands green, intelligent mining and smelting breakthroughs, plus deep investment in recycling — copper, aluminum, and waste from solar and battery modules included. It also pushes for 20 Mt+ of recycled metal output, turning #scrap into a core feedstock. Meanwhile, China’s State Council and CNMC tighten #mining licenses, boost ultra-high-purity R&D, and build stockpiles of “scattered” metals to cushion volatility. 📉 What the Market Is Saying Treatment and refining charges (TC/RCs) have collapsed — Fastmarkets projects USD 10–20/tonne for 2025. Some smelters already take negative TC/RCs to secure feed. Reuters and CRU confirm: capacity keeps rising despite razor-thin margins — a structural paradox. ⚙️ Implications for Exporters and Smelters 💡 Quality becomes currency – Chinese refiners will reject low-grade or contaminated feed, enforcing tighter tolling clauses. “Good enough” will vanish. ♻️ Scrap becomes strategic – China’s recycling boom means intermediates (blister, anode, battery copper) will be fiercely contested. Upstream players must lock long-term scrap supply or integrate vertically. 📉 Margins go non-linear – As TC/RCs fade, profits must come from byproducts, premiums, or shared tolling schemes. Sulfuric acid, silver, and battery precursors will be new levers of value. 🌍 Demand won’t vanish — it’ll mutate – Exporters in Chile, Peru, and Canada will face not collapse but a restructuring of trade flows and specs. Those adapting fastest to compositional and traceability demands will lead. 🏭 Modular refining wins – Expect more small, flexible tolling units near mines or ports — “copper as a service,” refining outsourced to China or ASEAN micro-refineries. 🧠 A Challenge to the Copper Community If China is shifting from importing tons to importing quality, are we still competing on volume? Three bets to explore: 1️⃣ Hybrid feed models — mixing concentrate, scrap, and PV waste to craft engineered portfolios. 2️⃣ Digital twin smelters — AI-driven, emission-optimized, traceable, delivering ESG premiums. 3️⃣ Global hedge networks — sourcing in Africa, refining in Asia, delivering to the U.S. or EU, fully synchronized. 🎯 Bottom Line: China isn’t just buying copper — it’s rewriting the playbook. Winners will be those who stop chasing tonnage and start designing value systems. Copper’s next frontier isn’t underground — it’s at the interface of technology, policy, and adaptive #strategy. Which of these strategies would you bet on first? #Sustainability