Portfolio Construction in a Downturn: Where to Find Safety Today

September 6, 2021

Building an investment portfolio can be exciting. But, when the economy feels fragile, investing your hard-earned money can feel like handing it over to a stranger in a back alley who promises to return it with interest.

If this is what the thought of investing feels like, there are ways to play it safe— to instead give your money to a friendly-looking gentleman on the street with a contract that describes what your returns will be. Or even better, a woman in a bank who provides a contract outlining interest terms.

In general, portfolio construction is the practice of investing in a range of different types of assets — some riskier with higher return potential, some safer with less upside, and some in the middle — in order to create a portfolio that works together to produce the best possible returns for the investor at the least possible risk to their bottom line.

As Vanguard explains it: “When it comes to building a portfolio, some individual investors focus on selecting the right fund manager or security. However, manager selection forms only a small part of the process. At a broader level, portfolio construction should be about structuring your portfolio in a way that stands the best chance of meeting your stated investment aims within your acceptable level of risk.”

What about in today’s uncertain, volatile market? Here’s how to play it safe with your money, but including some of these less risky assets as part of your overall portfolio strategy.

High-yield savings accounts

These accounts are useful for emergency funds and savings, paying a higher than average yield. In addition to considering the account’s APY, investors should consider their compounding method, which can happen on a daily, weekly, monthly, quarterly or even yearly basis. Minimum deposits vary, and sometimes APYs and other benefits are tiered based on them.

Money market accounts

A money market account (MMA) is a type of high-yield savings account. These typically offer a slightly higher rate than high-yield savings account, but might have higher minimum requirements.

Certificates of Deposit (CD)

While savings accounts allow for easier withdrawals, CDs are deposit accounts that tend to pay higher yields than traditional savings and money market accounts.


Considered one of the safest investments, bonds allow you to purchase a sum of debt from the U.S. Department of Treasury or private companies. Bonds are basically a loan to a borrowing entity, which then pays you interest on a regular schedule as long as you hold that bond. Historically, bonds have behaved inverse of stocks, rising when the stock market goes down and vice versa.

Mutual funds

A mutual fund pools money from a number of investors who purchase shares in the fund and invests the money it in a variety of securities including stocks, bonds, and short-term debt. Mutual funds are considered safe both because they offer the ability to invest in a variety of assets and because they are professionally managed. They are also available at a relatively low cost.

Alternative investments

Alternative investments are assets that are non-correlated with traditional assets, like stocks, bonds and securities. They help to protect against inflation. Alternative investments include private equity or venture capital, hedge funds, managed futures, art and antiques, commodities, and derivatives contracts. These are typically a good addition to an existing portfolio as opposed to a first-purchase, although that’s not necessarily the case.

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Your appetite for risk— or rather, for safety—will change with the chapters of life and the swings of the economy.

Whether you are starting your portfolio from scratch or looking to build upon an investment portfolio that you’ve been managing for years, some investments are safer than others for your money— especially when the economy feels unpredictable.

Safe investments might seem boring, but they are still better than keeping your money under your mattress. And, they will help you sleep at night, knowing that your money is safely growing to meet your future needs.

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