There’s never a dull moment in investing, what with rates rising, geopolitics taking centre stage, new tech developments popping up in unexpected places and ETFs flooding the market — not to mention real flooding and other natural disasters occurring around the globe.

In such an environment, how do you manage risk while still producing upside?

“The key to a successful fixed income portfolio is to be in the right bond asset class at the right time,” says Terri Spath, CIO at Sierra Investment Management, in a blog post. During bull markets, her firm’s strategy is to rotate across such assets as emerging market bonds, high-yield bonds, floating-rate loans, Treasury bonds, international bonds and municipal bonds.

Read: Expect ‘significant’ increase in bond yields: economist

“At the same time, our discipline allows 100% cash exposure to mitigate losses during broad market collapses,” she says.

Commodities at cycle’s end

For equities, Chris Kerlow, CFA, says in a Richardson GMP report that in the late stages of an economic expansion — as we are in now — the commodity sector tends to perform well.

Read: What’s next for Alberta as ‘commodity super-cycle’ ends

“Large integrated oil companies and pipelines tend to be core holdings for us at this point of the cycle,” he says.

Pipelines include TransCanada and Enbridge — two of the largest, most established names in energy, and which continue to grow organically. Those choices represent a defensive position, as energy stocks have seen their share of ups and downs recently.

Though Enbridge’s acquisition of Spectra added debt, “below $50, the valuation becomes appealing again,” says Kerlow.

For TransCanada, he’s positive on how the business has diversified south of the border, as mainline gas prices have come under pressure in Canada.

“In 2013, they generated 34% of revenue from the U.S. Today, that number is closer to 60%,” he says.

For large-cap integrated companies, he looks for names that can generate free cash-flow from three avenues:

  • downstream (gas stations),
  • midstream (pipelines) and
  • upsteam (wells).

“Suncor is a prime example,” he says. “It is a core holding of ours that offers an attractive 3.3% dividend, supported by good production growth and slowing capital spending.”

Risk lies in Suncor’s reliance on the oil sands in the face of potential competition from other projects. “But new growth initiatives are quite costly and not competitive on a global scale,” says Kerlow.

Rounding out his energy names is Bonterra, which offers growth at a reasonable price. The company offers “attractive dividend yield, quality assets and potential upside if we are wrong and oil prices move meaningfully to the upside,” he says.

Mind your materials

Investing in materials is tricky right now. That’s because China’s growth and thus demand for metals is slowing. Also, companies recognize the cyclicality of their business models and are thus wary of distributing dividends.

But innovation in the space creates opportunities in myriad subsections, says Kerlow.

He holds Franco Nevada, one of very few gold companies in Canada to offer a dividend. Further, he says gold exposure mitigates his firm’s long U.S. dollar exposure and is a safe haven during geopolitical unrest.

Read: Best Canadian commodity picks

International Paper, which makes boxes for online shopping shipments, is another holding. As reported by Bloomberg, customers include Amazon, FedEx and UPS.

Kerlow admits the holding capitalizes on a “glaringly obvious” trend, and new players are attracted to the online sales space. “But there are no major facilities slated to be completed until the end of next year,” he says.

Read the full reports from Sierra and Richardson GMP.