If a Stock Market Crash Is Coming, Should You Buy More Bonds? New Research Might Make You Think Twice.
Is there an alternative to buying bonds in case of a stock market downturn? These two funds could be a different way to hedge.
Overview
Are bonds still a "safe" place to invest in case of a stock market crash? According to recent research from the International Monetary Fund (IMF), maybe not. February research on stock-bond diversification found that bonds and stocks have become more positively correlated since 2019.
That means the old rule of thumb that "when stocks go down, bonds go up" might no longer apply. Many investors (including me) own bond exchange-traded funds (ETFs) such as the Vanguard Total Bond Market ETF as part of a diversified portfolio strategy. But buying bonds might not be an effective way to protect against a stock market downturn.
How should you invest if buying bonds is no longer a good strategy to diversify your portfolio? The IMF's research didn't recommend any specific investments or ETFs, but it did note that including commodities in an investor's portfolio could help protect against a potential shift in correlations.
Details
An easy way to buy commodities like precious metals is to buy the iShares Silver Trust (NYSEMKT: SLV) or the VanEck Rare Earth and Strategic Metals ETF (NYSEMKT: REMX). These ETFs offer risks as well as upside. But if you're interested in diversifying your portfolio away from the usual mix of stocks and bonds, they could be worth a look.
Source
Originally published at www.fool.com.