Fear ruled the day in 2012 as investors spent much of the year fleeing equities in favor of fixed income. This has created an opportunity for financial advisors to help clients understand the need for investing in stocks for long-term capital appreciation while managing risk with asset diversification.
For advisors who manage portfolio risk by overweighting non-cyclical sectors, 2012 has been a painful year as the Utility sector has been surprisingly volatile. The year, however, illustrates why advisors may want to consider cushioning risk by using alternative investments or funds that use a combination of short positions and traditional long positions.
Fears over the euro-zone debt crisis have become second fiddle to growing concerns over the upcoming fiscal cliff, which threatens to increase taxes and create substantial government spending cuts, both of which may push the country back into a recession. For financial advisors, however, helping individuals develop strategies to lessen tax pain in 2013 can be a powerful prospecting and client retention tool.