This week we take on a subject which, while not that earth-movingly exciting, has gained in popularity over recent years in the investment industry, and that subject is rebalancing.
Rebalancing, in the simplest and most honest terms can be described as taking money out of your 'winners' and putting it into your 'losers'! Please bear with us and we'll explain!
With lots of lovely head-lines lately talking about Equities at all-time highs and general euphoria about investing.......it might (or might not pay) to be aware of rebalancing, and how it impacts on your investments.
When it comes to Investing & Pension Funds in Ireland in 2017 or indeed most aspects of creating investment portfolios, since 2008 there has been a sharp focus on ensuring that investments are well diversified. Due to the scorchingly severe falls in values of equities and property at that time people have been once bitten and are now twice shy. There is now a big push to diversify between different asset classes to reduce that volatility & who'd blame them.....even though it this does fly in the face of the fact that a broadly held basket of equities outperforms any other asset class over the long term!
Product providers and indeed the industry at large now go to great lengths to encourage people to avoid being overly exposed to one particular asset (even if, as already stated, historically one particular asset class has performed above all others!). Investors are now encouraged to have a balance of 2 or more asset classes, such as equities and bonds, or equities, bonds and property etc etc. This is done ultimately in order to try reduce the volatility yet still achieve reasonable returns. For more on diversification by all means this might be useful (or not!).
Thanks a mill for checking it out, and if you prefer to read this by all means check out our blog version of this episode.....here.
Thanks so much.
You're a legend!