Volatility – What it means for Investors
Since the global credit crisis, investors have become more aware of risk in general and portfolio volatility in particular. At times, there can seem to be a lot of volatility about.
In a world of 24/7 media commentary continuously focusing on economic problems, such as the debt crisis in Greece or recent share falls in China, it’s understandable to feel a little concerned about the investment climate and the volatile state of stocks and markets.
However, it’s important to realise that some market volatility is inevitable; markets are likely to move up and down and accepting a degree of risk is part and parcel of investing. What you have to decide as an investor is how much risk is right for you. While the process of building a portfolio includes strategies to reduce risk, it cannot
be eliminated altogether.
TAKING THE LONGER-TERM VIEW
The key to investing is to ensure you don’t ‘put all your eggs in one basket’. Spreading your money around the different asset classes – cash, shares, bonds and property – helps reduce your exposure to risk and volatility. Regularly revisiting your risk appetite is important too. While younger investors are potentially happy to accept a greater degree of risk as time is on their side, those approaching retirement may well find their appetite for risk diminishes and may prefer to opt for a more conservative investment strategy with less exposure to risk.
REVIEWING YOUR PORTFOLIO
While focussing too much on short-term gains or losses is unwise, so too is ignoring your investments altogether. If you haven’t reviewed your portfolio for a while, it could be time to discuss matters with your Financial Adviser here at Logic Wealth Planning. We will be able to check that your asset allocation is still right for you, and undertake any necessary portfolio rebalancing that the review throws up.