Nov 24 2008
Reduce Portfolio Risk
Risk has become an important word in the nasty bear market. One solution to reducing risk is to build a portfolio using investments that do not track the S&P 500 or at least deviate from the standard benchmark. If one is using ETFs to construct a portfolio, this Yahoo site is one place to go to troll for assets that have low R-Squared (R^2) values as measured with respect to the S&P 500.
Using the reference cited above, one can sort ETFs to find those that have a low R^2 value. Of course one will want to know a lot more about each ETF other than the R^2 value. Will the ETF enhance the projected return, what is the expense ratio, and will adding the ETF increase the diversity of the portfolio? The R^2 value is one one factor to consider. It is an important one so spend time with this Yahoo reference.
Over the next few weeks, Premium Content readers will find examples of portfolios designed to reduce risk. These ideas will be incorporated into portfolios still under construction.
Photograph: Time to make Thanksgiving cranberry relish.
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