Positioning Portfolios Amid Market Shifts

Our Philosophy on Risk Management
A foundational element of our investment approach is taking proactive steps to manage downside risk. While no one can predict short-term movements, we aim to have precautions in place before they are needed — a philosophy that’s central to our practice. Our conservative nature keeps us focused on preparing for a wide range of scenarios, including those that are less favorable.

–New Tools–
As you know, we are a team of researchers and learners, so we are always working with partners and mentors to find new ways to care for our clients. One product we’ve been interested in allows us to have market exposure without participating fully in market volatility. Knowing that there will be continued volatility, we are exploring strategies that balance participation with prudence.

–Alternatives–
We’ve also expanded our use of alternative investments. These are not directly tied to daily movements in public markets and can offer diversification, attractive tax attributes, and more stable returns via potential interest and income. This can be particularly helpful when public markets are reacting to headlines — alternatives often follow a different timeline and tend to be less correlated, as they don’t price daily the same way public markets do.

–Annuities–
We’ve also used select annuity products as part of our planning strategy. Though annuities are sometimes misunderstood, modern versions can offer diversified market exposure alongside built-in risk management features. These features include floors, guaranteed income benefits options, and death benefits. As a reminder, many pensions are built on an annuity chassis, which is helpful to remember when considering this product option, given its mixed reputation through history. It’s essentially insurance on your income.

As with any product, there are pros and cons. While the potential for growth may be limited to a range, the trade-off for that downside risk mitigation can be worth it — especially when aligning with long-term retirement goals and cash flow needs, which can be addressed through guaranteed income, very much like building a personal pension.

–Diversification–
Diversification remains a key principle of our investment strategy. We’ve continued to maintain exposure across different asset classes — including international markets and fixed income — to help reduce overall portfolio volatility. These components also serve as potential sources of liquidity during market pullbacks, as we saw earlier this year. For example, during the March/April major pullback related to tariff announcements, we saw value stocks and bonds hold up better than growth stocks, like semiconductors. We were able to pull from these sources to reinvest back into growth, just as share prices were temporarily lower.

Lastly, a reminder that bonds or fixed income allocations are there for two purposes: not growth, but instead for potential stable income and as a “shock absorber” to market pull backs, as they also tend to move more slowly in relation to market news.

–Defensive Allocations–
Some clients have recently requested more defensive exposure, including exchange-traded funds (ETFs) focused on sectors tied to defense, aerospace, and related industries. Based on current geopolitical and economic conditions, we are incorporating these selectively across portfolios where appropriate.

Let’s Discuss Further
If you’re interested in learning more about any of these strategies or how they might complement your portfolio, we’d be happy to talk through them in more detail. Please don’t hesitate to reach out or bring it up during your next strategy session.

As always, thank you for your continued trust and partnership. We remain committed to helping you and your family navigate today’s markets while planning confidently for the future.

Warm regards,
Zahya and the Damefender Team

Disclosures

Investing involves risk including the loss of principal. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.​ ​Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses. Structured products typically have two components; a note and a derivative and a fixed maturity.  They are complicated investments intended for a “buy and hold” strategy and offer a level of protection from downside risk in exchange for forgoing some upside potential to achieve that protection.  Principal protection may vary from partial to 100 percent. Investing in structured notes is not equivalent to investing directly in the underlying securities or index and carry risks such as loss of principal and the possibility that you may own the referenced asset at a lower price, due to economic and market factors that my either offset or magnify each other.  At maturity, if the derivative turns out to be valuable, the investor can gain exposure to the upside of that index. Fixed and Variable annuities are suitable for long-term investing, such as retirement investing.  Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.  Variable annuities are subject to market risk and may lose value.​ Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Bond yields are subject to change. Certain call or special redemption features may exist which could impact yield