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Characteristics of Diversifying Assets
- A good diversifying asset should have low correlation to equities, maintain liquidity, and perform well in downturns.
- This helps reduce drawdowns in bear markets and acts as a hedge in risk-off environments.
Selling Bonds Amid Bear Market
- Jason sold bonds during the 2022-2023 bear market instead of equities to preserve his equity holdings.
- He also took advantage of tax loss harvesting, which eased the discomfort of selling bonds at a loss.
Optimal Bond Asset Location
- Place the bulk of your bond holdings in tax-deferred accounts to avoid ordinary income taxes on interest.
- Holding bonds in taxable accounts enables tax loss harvesting but may be less tax-efficient overall.