Volatility is not fun for most investors so it’s important to remember the main principles of investing and getting back to basics when times are less certain.
The latest investor survey shows that less than 20% of investors are bullish at the moment. This is the lowest investor sentiment in 5 years and people are obviously thinking about getting out of the market until things settle down.
Diversification Works
This is the golden rule of investing for the long term. A well balanced, diversified portfolio can help reduce the risk of losses in the event of markets downturning.
In the sell off this 2022 we’ve seen stock and bonds decline. In January global stocks were down -8% whereas an average diversified portfolio was down -6%. Even a basic 60% MCSI 40% Bond Index portfolio has offered reasonable protection.
A diversified portfolio is designed for long term investors. it will reduce risk and enable a smoother ride in volatile markets which is more important than the shorter term gains of equities that carry a loss risk of the same in equal measure.
Always Something To Worry About
In 2020 everyone was worried about covid and the US election. In 2021 it was the new variants of covid and China’s property turmoil and regulation crackdown. Today it’s war and inflation and tomorrow there will be something else.
Conclusion
The S&P has more than doubled since 2017. When times are tough it’s worth remembering the basics in that diversification and long term time in the markets will always prevail over badly timed mistakes reacting to shorter term world events. The fundamentals are tried and tested and remain always prevalent.
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This article is for informational purpose only. It does not constitute finacial, tax or legal advice, nor is it a recommendation to buy, sell or hold any investment. Past performance is not a guide to the future, investments rise and fall so investors could make a loss. No view is given on the present, future value or price of any investment and investors should form their own view on any proposed investment.