Four ways to navigate investment challenges in a post-Covid world

When building a portfolio, a multi-asset approach aims to provide a level of diversification that can protect returns over time, even when markets are volatile.

By investing in assets with different patterns of returns, such as equities and bonds, as well as a small number of other asset classes that add further diversification, such as physical gold, investors are more likely to temper losses through falling markets.

Focus on risk

Many investors are understandably concerned about the risks their portfolios are taking and whether those risks are right for them, especially in today’s changeable conditions.

Take the time to ensure that any fund – or allocation – in portfolios matches investors’ risk tolerance.

Many funds have a predefined volatility band, which is vital to pursuing the right balance of risk and return potential – one that reflects investors’ individual financial position and investment goals. 

Keep an eye on costs

From a cost perspective, investors can benefit by accessing a product which keeps costs low, while still providing access to wider global investment expertise.

Some fund ranges are built using low-cost funds that track the performance of stock and bond markets but are overlaid with the active management of professional fund managers to invest in different funds based on where they see the best return potential. 

Think sustainably 

The world is changing, and investors are becoming increasingly concerned about the impact their investments are having.

The demand for ESG funds is clear: even in a volatile year like 2020, in aggregate, ESG funds experienced positive inflows versus their traditional peers.

Yet many investors may also be concerned that investing in an environmental, social and governance (ESG) fund is both expensive and can weigh on performance.

Investors who wish to see specific values reflected in their investments should rest assured that there are low-cost opportunities out there to make a long-term difference, while delivering long-term returns. 

When it comes to setting up a balanced portfolio that reflects investors’ finances, risk tolerances and goals, it is important to think broadly across risk, return and cost. More often than not, an all-weather portfolio - nothing fancy but suitable for all conditions - is required. 

Joe Parkin is head of UK Banks and Digital Channels at BlackRock