To our Clients and Friends,
During the past several weeks stock markets entered a highly volatile period, triggered mostly by the emergence of the coronavirus.
Some of you may be wondering what this means to your portfolio and should something be done? A few may be wondering if they should move to cash and buy back in later at a lower price?
Almost all the worlds investing greats tell us that there is no way to accurately predict the stock market in the short-term, and basing investment decisions on media headlines is a bad idea. Furthermore, history tells us that there are tremendous long-term risks to trying to time the market. Just ask those who went to cash during the 2008/09 financial crisis and did not reinvest until the recovery was well underway.
We all know that market volatility is normal and will happen again and again. This volatility is the price you pay for the superior long-term return's stocks generate when compared to GIC’s and bonds. Face it, we get better long-term returns because of volatility.
The good news this that we built our clients' portfolios to include defensive positions designed to help reduce normal but uncomfortable market fluctuations. These can include bonds, private debt, and alternative assets like commodities, futures and currencies. While these defensive positions are not perfect, your diversified portfolios coupled with regular rebalancing can help reduce portfolio fluctuation.
The illustration below compares a diversified portfolio with regular rebalancing vs. an all equity portfolio between 1986 and 2020. The diversified and rebalanced portfolio provided investors with a much smoother ride without loss of performance most of the time.
This can be a stressful time for some (especially for news junkies) but we here to help. Feel free to touch base anytime with your questions,
Thanks for reading,
Confused by the Cornavirus? Catch my recent blog “Corona Virus – Get the REAL Facts Before You React”