Most investors end up with over-diversified portfolios that are costly and deliver poor performance. The typical asset allocation model and subsequent investment in a group of diversified funds often results in a portfolio of “Global Mush” with literally thousands of tiny positions.
While stocks deliver unpredictable returns in the short-run, stocks are the least risky choice to build wealth over longer time periods. As the investment horizon increases, loss of purchasing power becomes the main risk.
With the surging economy and the recent shift in monetary policy, many investors are worried about rising interest rates and potential inflation. A little historical information can provide valuable perspective.
Once again, we’re experiencing an upsurge in the noise around market volatility, increasing concerns about a trade war with China and future monetary policy. This can be overwhelming for the average investor and certainly hard to know when to be concerned and when to tune out the noise. Our market dashboard below shows that, while things may be noisy, there is no indication of an impending economic or market meltdown. We continue to follow the trade negotiations between the US and China and track whether they begins to tilt our market indicators.
After last year’s tranquil environment, markets experienced a sharp pullback in February and have returned to a more normal level of volatility. As a result, many investors are wondering, where are we now and what’s next? The chart below highlights how recent events compare to the prior 11 corrections.
It’s important for investors to understand how different investment strategies work and how each performs under various market conditions. The chart below highlights 10 investment strategy groups and their performance ranking over the last decade. When building long-term growth portfolios, allocating among different strategies can help to reduce anxiety without sacrificing returns.