Bespoke portfolio’s: what’s right for you?
When uncertainty strikes, financial markets often respond with a period of volatility. It can be difficult to remain pragmatic and unruffled when asset prices are swinging back and forth. Nevertheless, it’s important to keep your head and focus on the facts, not the hysteria.
- At Imperial, we have ensured your portfolio is properly diversified
- Crises can create opportunities
- Our focus is always on the long term
Remember – Investing Typically Beats Cash.
Some people’s natural reaction is to panic and to want to have everything in cash. Savings accounts typically struggle to keep pace with inflation, seeing savers lose value in ‘real’ terms. In the graph below, bills are short-dated bonds which give an indication of what returns on cash could have been.
Are you diversified?
At Imperial our portfolios are already well-diversified. We spread our investments (and risk) across different assets, across the globe – including equities, bonds and cash.
Spreading your portfolio across a range of asset classes means you reduce the risk that bad performance from a single investment or asset class will have a disproportionately negative effect on your entire portfolio.
Different assets typically will not react in the same way to sudden economic shocks, so a combination will limit how much your portfolio ebbs and flows in value. Over time, this reduces the impact of volatile periods on your investments’ overall performance.
Consider some international exposure
All of our portfolios have global diversification. It’s worth considering your exposure to international markets. For many UK-based investors, a UK-focused portfolio seems a sensible and logical choice: sterling-denominated investments and familiar names provide a welcome degree of comfort and reassurance.
On the other hand, a UK-centric portfolio – even one with plenty of exposure to the major multinationals – will leave you particularly susceptible to fluctuations in domestic sentiment. Branching out into international markets – particularly via a diversified collective investment scheme such as a unit trust or OEIC – can help you to reduce your portfolio’s vulnerability to domestic UK developments.
Keep calm and carry on…
Above all, it’s vital that you don’t panic. It’s quite a challenge to remain calm when you’re faced with dramatic news headlines and pundits prophesying doom. Nevertheless, take a step back: if you are investing over the long term, you have to expect some rough times along with the smooth. At Imperial our portfolios are well-diversified and constructed to reflect your goals and priorities, you shouldn’t allow yourself to be blown off course by periods of short-term uncertainty.
The global economy has endured plenty of adversity over the decades, and yet the stock market has continued to climb, given time.