INVESTOR EDUCATION
Markets and the economy
When in doubt, do nothing
Published on February 8, 2020
INVESTOR EDUCATION: Markets and the economy | Investor Education
When in doubt, do nothing
Published on February 8, 2020
Establishing a Foundation
The cornerstone of navigating market fluctuations lies in a proactive and informed strategy. As a firm, we stress the importance of:
- Defining or reassessing investment goals to ensure alignment with personal financial objectives.
- Crafting an asset allocation strategy that leverages diversified funds for optimal balance.
- Emphasizing cost efficiency across investment activities.
- Fostering long-term perspectives and maintaining investment discipline.
These elements are the bedrock of a robust investment plan, essential for harnessing the full benefits of your investment journey. Our principles, as outlined in the “Principles for Successful Investing,” provide a comprehensive guide to these foundational steps, further explored within our research on constructing globally diversified portfolios.
The Art of Rebalancing
Adjusting your portfolio to maintain your desired asset allocation is critical. While seemingly straightforward, rebalancing challenges investors psychologically, requiring the sale of assets that are performing well in favor of those that are not.
During market downturns, rebalancing may necessitate increasing positions in assets that have diminished in value. As Stephen Utkus, our head of investor research, notes, “This approach may appear counterintuitive, yet it stands as a financially prudent method to remain steadfast or even enhance positions in depreciating assets.”
The Virtue of Patience
Investment is inherently a long-term endeavor, aimed at achieving sustained goals. Our projections, starting from the fourth quarter of 2019, indicate modest growth over the next decade, with a globally diversified portfolio of 60% stocks and 40% bonds anticipated to yield annual returns between 3.5% and 6.3%. This outlook, detailed in our “2020 Economic and Financial Markets Outlook: A New Era of Uncertainty,” acknowledges the potential for significant market corrections. However, our investment strategists remain optimistic about long-term prospects. To capitalize on the market’s growth potential over time, it’s crucial to remain invested, even through challenging periods.
This article is being provided for educational purposes only. The information contained in this article does not constitute a recommendation from any Global Advisers entity to the recipient, and Global Advisers is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. Neither Global Advisers nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this article and any liability therefore (including in respect of direct, indirect, or consequential loss or damage) is expressly disclaimed.