Is your portfolio diversified enough?
Investments
Posted by MoneyController on 29.08.2024
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Many investors wonder whether their portfolios are sufficiently diversified in a situation of market uncertainty such as the current one.
Since mid-July, the almost uninterrupted growth of the major stock indices has given way to a period of volatility. There are many elements of uncertainty affecting the markets: the trajectories of monetary policies and inflation, ongoing trade tensions and conflicts, the outcome of the US elections in November, etc.
In a period of increasing uncertainty, it is normal for many investors to ask an important question: is my investment portfolio sufficiently diversified? Most small savers typically ask their financial advisor this question. Financial professionals, for their part, prepare strategies to diversify the portfolio so that it is in line with investors' needs (return objectives, risk tolerance, etc.).
In this regard, Karen Watkin, a portfolio manager at Alliance Bernstein, was quoted on FONDS Professionell: Watkin believes that the multi-asset strategy, due to its flexibility, lends itself well to the diversification needs of a portfolio. For example, she mentions the role that bonds could play in an investment strategy today: in the face of downward corrections in equities, bonds are often a source of alternative returns; they could also benefit from falling interest rates over the coming months.
At a time of significant market uncertainty, Watkin believes that the multi-asset strategy goes a step further than simply laying down the fundamentals (‘Bausteine’) of a portfolio: this strategy provides the ability to adapt to changing market conditions; this means being prepared to try to react to any increased risk situations, as well as trying to take advantage of favourable market situations.
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Why does it make sense to diversify your investment portfolio?