Equity investors can put their money to work across nine style boxes (think of the large-mid-small/growth-core-value matrix). That’s some diversification potential. Why is it then that some investors only have one flavor of fixed income in their portfolios?
Why would investors demand nine styles of equity, but seldom have more than one fixed income allocation – usually a core or core-plus strategy benchmarked to something like the Barclays Aggregate Index? Read more
True or false? It doesn’t matter how much an investment goes up or down in value, as long as the average return over time is good.
If you chose “true,” you’re wrong. But you’re not alone. Many investors don’t realize the impact volatility can have on returns over time.
I’ve written previously about market volatility and how severe volatility can hurt overall portfolio return.
It should always be understood, when in the market, that volatility comes with the territory. Still, investors can manage the impacts of volatility through portfolio diversification. Diversification doesn’t assure a profit or protect against a loss in a market decline, but it can help to smooth the shocks in an investment portfolio.