As 2019 came to an end, there were a number of risks that investors around the world would have to watch out for – Brexit negotiations, the US election, the trade war between China and the US – but nobody could have guessed that the COVID-19 pandemic was to come.
In turbulent times, keeping a steady course is usually a much more effective strategy than trying to predict how markets will react.
Many investors will be tempted to time the market, by either reducing positions or postponing rebalancing decisions in the face of large portfolio losses.
However, it is still important to emphasise the obvious: pension funds are long-term investors with investment strategies and target allocations that already take into account the risk of market turbulence.
Timing the market is incredibly difficult and many investors still don’t get it right at the best of times. It is highly likely that the coronavirus will continue to have an impact on markets for some time.
“In such volatile times a steady and stable strategy will often succeed and asset owners will reap the rewards from a long-term strategy”
But continuing to invest in such volatile times means that a steady and stable strategy will often succeed and asset owners should reap the rewards of a long-term focus.
While investors cannot control how markets will perform, they can control how they invest. In this unprecedented time, in addition to a long-term focus, portfolio diversification is the best means to deliver long-term returns.
Venilia Amorim, editor, IPE.com
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