If there’s a standard formula for a professionally designed, diversified investment portfolio, it would be ‘diversification’ + ‘balanced fund’. It’s the golden rule of successful investing. A balanced fund with an intricately planned allocation across the main asset classes will more likely reduce the volatility of returns. As for ‘diversification’, multi-asset investing has become the pillar of many an IFA. A diversified portfolio is definitely one of the most important parts of a sound investment advice.
The concept of multi-asset investment is simple. If one asset class goes down, another might be making up for its downturn, thus, covering your loss for the diminishing asset class. This investing strategy will benefit investors in the long term, especially those with substantial sums to invest.
Though the recent financial crisis made an exemption, when all asset classes appeared to correlate with each other, making investors uncertain about their portfolios, still, experts believes that having diversified assets has higher returns in the long term.
To protect multi-asset funds from downside risk, some managers are even developing hedging strategies and IFAs are also dealing with the RDR. Investors are sorting their clients according to how much time they can allocate to each one. This situation exemplifies the great advantage of multi-asset investing as it is designed to accommodate the different type of risk each client can tolerate, and therefore become helpful in portfolio construction for them. In a short period of time, IFAs might find multi-asset investing in ready-made funds, which are made up of bonds, equities and other assets could be more helpful in years to come.
Per Olov Jansson
CEO Cardea International