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Tom Meaglia, ChFC®, AEP®,
CLU®, CRPC®, MSFS
Chartered Financial Consultant
Investment Advisor Representative
Chartered Retirement Planning Counselor
CA Insurance Lic. #0567507
Meaglia Financial Consulting
2105 Foothill Blvd., #B140, La Verne, CA 91750
Toll Free: 800-386-3700
Bus: 909-593-6105
Cell: 818-681-8600
Fax: 909-593-6120
Email: tom@meagliafinancialconsulting.com
Website: www.meagliafinancialconsulting.com
January/February 2024
Weigh in on the Barbell Strategy
You don’t have to be a fitness buff to know that a barbell is a long bar with weights at either end that’s used for strength training and bodybuilding. You might have used one at the gym. But what is the barbell investing strategy?
A Different Approach
Investors who employ a barbell strategy choose investments that represent opposite ends of the risk spectrum while ignoring anything in the middle. Although this approach more commonly appeals to fixed-income investors, it may be attractive to certain equity investors as well.How It Works
Fixed-income investors create a portfolio consisting of half short-term bonds and half long-term holdings. With this strategy, investors can take advantage of current interest rates by investing in short-term bonds while benefitting from the higher yields offered by long-term bonds. When interest rates are rising, investors can reinvest in bonds paying higher rates as their short-term bonds come due. When rates fall, investors have a cushion because their long-term bonds have locked in higher rates.Not Without Risk
Certain risks are inherent to bond investments. Interest rate risk is the potential for a change in interest rates to reduce the value of fixed-rate investments. As interest rates rise, bond prices typically fall, and vice versa. Inflation risk is the risk that rising inflation will lower the purchasing power of your bonds. Reinvestment risk is the possibility of reinvesting money at a lower interest rate.A Barbell Strategy with Equities
Equities investors might use a barbell strategy to create a portfolio comprised of half stocks and half fixed-income investments. Another option is to pair the stocks of large, stable companies with riskier stock investments, such as emerging markets.Look for Opportunity
The best time for bond investors to implement a barbell strategy is when there are significant gaps between short-term and long-term bond yields since this approach is closely tied to interest rates. Keep in mind that a barbell strategy requires frequent monitoring by investors and their financial professional to be successful.CONTACT US
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Thomas Meaglia is an Investment Adviser Representative of Coppell Advisory Solutions LLC, dba, Fusion Capital Management, a registered investment adviser that only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The firm is not engaged in the practice of law or accounting.
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