Are all your eggs in more than one basket? [Charticle]

The power of diversification cannot be underestimated in uncertain times and during periods of significant market dislocation

Performance of any single asset class can be random from one year to the next. The chart above shows year-on-year performance in percentage terms for the main asset class indices over the last 10 years and it indicates there is no clear pattern.
Investing in one asset class is clearly risky. A diversified portfolio, which holds a number of different asset classes in each year, will be more resilient to single market downturns and can better withstand market volatility. It also provides the investor with more opportunity to seek out investment returns in specific assets or sectors which may be performing at any point in time.
In a world where the future is uncertain and markets remain volatile, diversification helps to manage investment risks and protect against the impact of significant capital loss. It also broadens investment opportunities to enhance return and achieve desired financial outcomes.
Diversifying a portfolio requires skill and experience in allocating effectively across asset classes through various market cycles. Blending asset classes to balance the risk and carefully selecting investments within those asset classes to enhance the return is critical to achieve an optimal investment outcome.

This article appears in the Q1 2022 edition of our StandPoint publication. Click here to download a copy of the full publication.