Adriaan Pask from PSG Wealth:
“In general, investors face the risk of picking a fund that can either perform well or poorly, depending on a number of variables. These decisions will ultimately influence the probability of losses relative to the expected return on their investment. Investors erroneously look at historical performance for guidance to help them make these selections, and overlook the general rule of thumb in investing, which warns against assuming that an investment will continue to perform well simply because it has done so in the past.
The same can be said about overlooking an investment simply because it has gone through periods of underperformance recently, as it may well improve in the future. It’s important to remember that trying to predict what markets will do next, and which funds are likely to outperform, is close to impossible.
Therefore, putting your eggs in different baskets is your best bet for surviving market volatility, as it limits your portfolio losses.
Multi-asset funds offer exposure to a broader range of asset classes that can act as a buffer against volatile markets. Investment returns vary significantly between different asset classes, which can provide some protection against major losses in your portfolio. When one asset class underperforms, the others can pick up the slack.”
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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