Most of you reading this are no doubt disappointed in your investing performance for the year, and rightfully so. Usually we count on the benefits of diversification to provide one of the few free lunches in investing: mix together different asset classes and experience lower volatility with similar returns. What’s not to like; less volatility, same returns!
Some might say this year diversification failed. Not one major asset class had a significant positive return. Most major US and international stock indexes were down, some in the double digits. Even the stalwart hero of the conservative portfolio, the aggregate bond index was basically flat for the year. Gold and Silver, the supposed safe haven assets in a crisis, were both down: -2% and -9% respectively. (Client note: since we have been expecting interest rates to rise in the last couple of years, our portfolios have mostly short duration bonds. These bonds have returned 1.5-2% this year. For a refresher on bond math, click here)
Note: The contents of this site are general in nature and not intended as specific investment advice. All investments are subject to risk; including loss of investment value. If you have any question regarding investments or concepts in these pages, please consult with an investment professional.