Mixed Investment 

Funds for managing in volatile times

  • To understand how multi-asset funds work
  • To grasp the importance of diversification
  • To understand how to select the right multi-asset fund
CPD
60min
Funds for managing in volatile times

Introduction

Multi-asset investing has become established as the best way to mitigate the volatility in the markets, when unpredictability on the world stage hits stocks and shatters investors' nerves.

A basic principle of portfolio management is to diversify one's assets, balancing those that benefit from taking more risk and hence in the good times achieve higher returns, against those that are more risk averse, and are likely to produce returns in adverse environments.

So typically an investor's portfolio will have a balance of various assets to mitigate any forthcoming volatility on the markets, but there are various ways of doing this. Either through an adviser's choice of funds, or through the selection of a multi-asset fund.

The latter have been in existence for a number of years, and while over the longer term they may not deliver huge returns to investors, they go a long way to calming clients' nerves in the short to medium term when volatility has struck the financial markets.

The Mixed Investment 0-35 per cent shares returned 43 per cent over the last 10 years, while the FTSE All Share returned 83 per cent over the same period.

Clearly investing in the stock market is not for the faint hearted and sometimes it resembles a casino; investors are told to invest for the long-term but sometimes, in the midst of a stock market plunge, that can seem the very worst idea. Multi-asset investing is one way to get through the hard times.

Melanie Tringham is features editor of Financial Adviser

In this guide

CPD
60min
  1. According to Melanie Tringham, how are people reducing short-term risk?

  2. According to Melanie Tringham, the pain of losing money is equal to the pain of gaining it; true or false?

  3. According to Gareth Lewis, which asset classes are good diversifiers away from UK equities?

  4. According to Gareth Lewis what proportion of the portfolio should be kept in equities for older clients?

  5. According to Ima Jackson-Obot, multi-asset funds do not have the same growth potential as UK All Companies; true or false?

  6. According to Nick McBreen, how do multi-asset managers manage the upside benefits and downside risks of different economic cycles?

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