In times of financial, political and economic uncertainty, the natural reaction for most people is not to do anything. The prospects of investment failure or of making a wrong choice regarding a financial decision, may be keeping you static. Even in uncertain times though there are opportunities to be taken; the key is to not put all your eggs in one basket and diversify your investments across multiple asset classes.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it.
Geopolitical concerns steal headlines
The media prey on bad news, so it is no wonder that the headlines are dominated with geopolitical concerns.
The continued global growth of late 2016 and early 2017 and with trade picking up, means that a few of the major economies may in fact perform ahead of what has been projected.
However, with the triggering of Article 50 in the UK, the pending general election in June and a further interest rate rise by the US Federal Reserve, it is understandable why investors are cautious.
Where then should we invest?
Multi-asset investment may protect against volatility
Each type of asset is also referred to as a class. For example, cash, equity and bonds are three separate examples of asset classes.
Multi-asset investment therefore, refers to using a portfolio that includes more than one asset class.
A multiasset class investor might hold stocks, cash and property, compared to a single-class investor who may only hold stocks.
In uncertain times, investors generally have a more cautious approach to investment than when the economy is consistently buoyant.
Naturally, risk increases when we can’t see clearly what is around the corner.
Diversification of investment, using multi-asset class investment is one way that can reduce risk in volatile economic markets. Although, it has to be carefully managed as potential returns can also hinder if you spread your resources too thin.
Effective diversification
To diversify an investment portfolio effectively takes experience and careful financial planning.
It isn’t a case of just selecting a few asset classes and “running with it”.
Historically, one particular asset class may be successful for a period of time, however it is rare for an asset class to outperform for all periods of time.
Portfolios need to be continually managed and adjusted to smooth out some of the extreme peaks and troughs that may occur.
It is always essential to keep in mind that investment strategy is generally for the longer-term. Whilst quick wins in investment are possible, in an uncertain and volatile market, they are invariably harder to come by.
Working with a skilled investment planner will also help retain focus on investments that meet the level of risk you are comfortable with.
Remain faithful to your portfolio
Volatile markets do bring a sense of fear, however they are also infiltrated with opportunity. Purchase prices tend to be lower and there is also the chance to stick your neck out and be the forerunner in a playing field others are not willing to enter.
For all investors though, even those with experience, there is heightened challenges in making solid investment decisions during uncertain times.
With any investment, the value can go both up and down and there are no guarantees.
Remaining faithful to a long-term investment strategy, with a diversified, risk-aware approach, stands the best chance of success.
Learn more about investment diversification
Dental & Medical Financial Services have been helping doctors and dentists with investment planning for over 25 years. Call to discuss your options with Darren:
Tel: 01403 780 770
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