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News, research and market insights from our team of experts.
We have heard all these questions – and more – in recent weeks, as investors react to the equity market sell-off in August-September and the subsequent bounce in recent weeks. The bulk of the decline happened quickly and caught many off guard:
The financial markets in general have stabilized in recent weeks, with the broad equity market showing substantial recovery from its lows. It is tempting to think that the long-awaited market "correction" is over and it is safe to add more equity risk to the portfolio. Yet the concerns we have expressed in recent months, which have led us to recommend reducing overall portfolio risk, are still in place – or have actually gotten worse:
With all that being said, the answers to the questions at the beginning of this piece may be different from one investor to the next. The distinction depends entirely on their investment objectives (return requirement, risk tolerance) and constraints (time horizon, tax sensitivity, liquidity preference, etc.), all of which should be documented in a well-crafted Investment Policy Statement. Such a tool helps neutralize the effects of emotion and provides structure around the investment decision making process.
Rigorous analysis and a sound investment philosophy are also critical for long-term success. Examples of these last two can be found in the accompanying articles this month – Bob Schaefer outlines Oxford's Investment Philosophy and Jim Mahoney addresses the changing climate for risk assets.
As always, you are encouraged to contact us for further information.
The above article represents the opinions of the author as of 10.29.15 and is subject to change at any time due to market or economic conditions or other factors.Print