Business & Investment

Preparation-Diversification and Multiple Management-Moneyweb

Unfortunately, the two terms “unprecedented” and “uncertainty” are often used this year.

We were all forced to understand a way of life that we had never faced before. Something that stopped at the truck and put everything on hold. The global epidemic caused by Covid-19 is still confusing and disturbing for most of us. The events that unfolded this year were certainly unpredictable, but the effects of the earthquakes experienced in the capital markets were not unnatural.

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Investors of all generations have experienced a serious market downturn at some point in the investment process. For some investors, 2020 presented them with the first financial market pressures. It’s important to remember that this year’s market shock wasn’t the first rodeo for investors. We were here before. This time we are facing another bull.

At the time of impact, it is difficult to rationalize what happens to the savings that investors have struggled to earn. However, it is the aftermath that the moment of reflection continues. The tranquility after a storm provides a breathing space for developing a clear and thoughtful response to future uncertainties. In other words, Howard Marks can’t predict what will happen, but he can prepare.

This year’s recession was no different than any other recession investors have experienced in the past. In fact, there have been numerous financial crises in the last 40 years, and before that there was an even longer list. Those who have taken the time to look back and listen to lessons from past experiences know that peace of mind in an uncertain world comes from preparation.

The stagnation that the world was exposed to (and continues in other countries) had a powerful ring-fenced breathing space for so many people. The blockade has slowed down so many aspects of our lives. All the noise and clutter seemed to disappear, calm down, and many of us realized and thanked what seemed to be the norm during normal hours. The impact of Covid-19 and its predictable knock-on effect have not been lost to us, but it clearly reminds us of the benefits of multi-management.

Intentional diversification

There is no guarantee on the investment, and diversified investments (investments in different types of investments across different sectors, currencies, regions, such as equities, real estate, cash) reduce the overall investment risk of the portfolio and are short-term. Helps smooth market volatility. As the saying goes, diversification is the only free lunch for investors.

Multi-management is an investment approach that presupposes diversified investment by deliberately combining multiple complementary asset managers across different markets, investment types, investment philosophies, and cash management styles. Strengthen and optimize investment returns. With the exception of the unattainable shield of full hindsight, the value of diversification built into the multi-management approach becomes especially apparent in markets like these. This is a persistent lesson from most market downturns in our history.

Adaptation is a rule of existence, no exception

To survive this year, we had to dig deeper into ourselves.We had to find Elasticity To overcome the challenges that have arisen with us Adaptability We will focus on unexpected changes in our lives and the environment.

In much the same way, investment portfolios needed to navigate very confused and changing markets. Resilience and adaptability were good means on the savings and investment side. An investment portfolio of comparable quality is arranged to be strong enough to participate in market opportunities and protect in extreme situations. These characteristics are the basis of a multi-managed portfolio and play an important role in mitigating the impact of such an environment.

Again, in the tranquility after the storm, I remembered the value of the multi-management investment approach. This is a persistent lesson that I have certainly appreciated and remembered about tackling market turmoil and maintaining long-term commitments to investors now and in the future.

Alexander Forbes Investments, Technical Marketing Officer, Ricardo Fontanella

Preparation-Diversification and Multiple Management-Moneyweb

https://www.moneyweb.co.za/moneyweb-opinion/soapbox/prepare-diversify-and-multi-manage/ Preparation-Diversification and Multiple Management-Moneyweb

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