From the Bunker: Strategies that are resistant to COVID-like events
- It's difficult to pick the top or bottom of a market so a long term strategy is essential
- Through the use of diversified portfolios, it is possible to smooth volatility
- Gold and cryptocurrencies are not a reliable hedge or safe-haven asset in our opinion
During the COVID-19 crisis, we’ve regularly been asked what the best strategy to handle weather this pandemic is. In this From the Bunker webinar, Evan and I discuss one way to future proof yourself and your income and look at how this stacks up in market cycles. While we are quick to note that there is not just ‘one strategy’, Evan runs through the merits of the ‘Bucket Strategy’ and has previously written about this in An investment strategy for retirees.
Using recent data, Evan charts how volatility is smoothed when comparing Australian Balanced Funds to the All Ordinaries. The smoothing of volatility is evident in the past and during the current crisis through the strategic use of diversified portfolios. Following on from this, Evan breaks down the Exchange Traded Funds (ETFs) that InvestSMART uses in their diversified capped fee portfolios and their individual performance over the past 12 months. You can find out more about the InvestSMART diversified portfolios here.
We answer viewer questions on using assets like gold and cryptocurrencies as a method to hedge or their utility as a safe-haven. You can watch the response in detail in the video; however, the short answer is we don’t feel they are.
Ultimately, what we found was that having an investment portfolio comprised of diversified asset classes helps to smooth out volatility and provide a more favourable return over the long term.
As always, it is essential to take into account your own personal circumstances, goals, time frame, and risk appetite, so you can determine your allocation to each of these. One method is to use a portfolio tracker like the InvestSMART Portfolio Manager. The InvestSMART Portfolio Manager is a free tool that will assist in tracking your investments and by using the HealthCheck, determine where you may be needing a patch up.
You can watch the recording below: