INVESTMENT MATTERS
THE BEST DEFENCE FOR VOLATILE MARKETS –
A Properly Structured and Well Diversified Portfolio
Financial markets do not move in a linear fashion but instead move up and down . One of the questions most frequently asked is whether market volatility is something investors should worry about . The simple answer is that although we have seen great short term market movements in recent years , provided one has a long term investment horizon , there should be little to fear from this . Trying to time entry and exit to financial markets is exceedingly difficult and rarely achieves its aim in volatile markets , whilst remaining invested for the long term can bring rewards for patient investors .
However , in the absence of proper portfolio planning , investors might have to crystallise losses when markets are falling , if there is a need for income or capital from investments ; the alternative being to wait for markets to recover , which might be unacceptable . With a properly structured portfolio , however , income and capital requirements can be planned ahead on an ongoing basis , removing these difficulties and ensuring that money is available as and when required . Additionally , investments can be made in a tax efficient way when a portfolio is suitably structured .
What also matters is that there is a clear investment strategy which reflects objectives and risk tolerance and that sufficient asset class diversity is present to avoid the ‘ all eggs in one basket ’ syndrome . A well diversified portfolio will include allocations to different asset classes and different geographies in order to spread risk and to produce a variety of returns at different times . If one investment performs poorly , it may be offset by another investment with superior performance . Diversification is not , however , a guarantee of certain returns or a guarantee against loss but having an asset allocation that is tailored around your goals and risk tolerance may help reduce volatility and fluctuations .
Diversification is a powerful investment strategy and a properly structured portfolio can bring confidence in the midst of market volatility .
NOTHING CONTAINED IN THE ARTICLE SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE . PLEASE NOTE THIS ARTICLE IS BASED ON OUR CURRENT UNDERSTANDING OF LEGISLATION , WHICH CAN BE SUBJECT TO CHANGE . THERE MAY BE VARIATIONS FOR THOSE LIVING IN SCOTLAND AND NORTHERN IRELAND .
Stuart D Bryant is a fee-based Certified Financial Planner , specialising in personal lifestyle planning and investment planning . SDB Strategic Planners Limited is authorised and regulated by the Financial Conduct Authority .
Tel : ( 01782 ) 712233 August / September 2013 53