{"id":1079,"date":"2023-03-03T00:00:00","date_gmt":"2023-03-03T00:00:00","guid":{"rendered":"https:\/\/www.rbcwealthmanagement.com\/en-eu\/2023\/03\/03\/how-to-navigate-volatility-and-grow-your-investment-portfolio\/"},"modified":"2024-08-19T11:12:28","modified_gmt":"2024-08-19T15:12:28","slug":"how-to-navigate-volatility-and-grow-your-investment-portfolio","status":"publish","type":"post","link":"https:\/\/www.rbcwealthmanagement.com\/en-eu\/insights\/how-to-navigate-volatility-and-grow-your-investment-portfolio","title":{"rendered":"How to navigate volatility and grow your investment portfolio"},"content":{"rendered":"\n

Financial markets can rarely be predicted at the best of times. Add to the mix rising interest rates, lofty inflation figures, a cost-of-living crisis and conflicting recessionary forecasts, and investors are faced with a somewhat <\/span>tricky landscape<\/a> <\/span>in which to find growth.<\/p>\n\n\n\n

Yet financial markets post-pandemic are booming \u2013 with the FTSE 100, for instance, reaching a record high in mid-February 2023, breaking through the 8,000-point mark.<\/p>\n\n\n\n

\u201cThis can present something of a confusing picture for investors, with one side seeming to contradict the other,” says David Storm, chief investment officer of RBC Wealth Management in the British Isles and Asia. \u201cBut it’s important to remember the markets aren’t the economy, and they don’t always move in lockstep.”<\/p>\n\n\n\n

So, what should investors be thinking about to achieve portfolio growth in this current environment?<\/p>\n\n\n\n

Here are five points worth considering.<\/p>\n\n\n\n

Revisit your current investment strategy<\/h2>\n\n\n\n

Regularly reviewing your investment portfolio should be a fundamental part of any strategy, irrespective of whether the landscape is volatile or not. Has your current strategy delivered the level of growth you anticipated? If not, then what needs changing?<\/p>\n\n\n\n

However, Carlos Gonzalez Lucar, head of manager research at RBC Wealth Management in the British Isles and Asia, sounds a note of caution. \u201cThere’s no point in fixing something if it isn’t broken,” he says. \u201cIf your general investment principles are delivering on your goals, there may be no need to change them. Or at most, any changes might be minimal. Don’t make changes for change’s sake.”<\/p>\n\n\n\n

That said, investment principles that have served people well in the past might not be right for this economic climate. For instance, the static 60\/40 portfolio (with 60 percent of a portfolio invested in equities and 40 percent in bonds\/fixed income) didn’t work in 2022, with both falling in value. Yet with markets and interest rates rising, the future may be brighter.<\/p>\n\n\n\n

But there are many opportunities available to investors that are beyond government and corporate bonds and global equities.<\/p>\n\n\n\n

\u201cInvestors need to think where they can generate returns from that are quite different from these traditional asset classes,” says Storm. \u201cThat can be key to building a properly diversified portfolio that can work in different environments. The 60\/40 approach effectively only has two return drivers. If you have four, five or six drivers, then you stand a much better chance of achieving your goals while minimising volatility risk.”<\/p>\n\n\n\n

Think short-, medium- and long-term goals<\/h2>\n\n\n\n

It’s imperative to consider different timelines and how they align with your goals when it comes to comprehensive portfolio planning. Your age and how quickly you want to achieve those goals will be key factors.<\/p>\n\n\n\n

For some investors, being clear on timelines and goals means they can allocate specific portions of wealth to each time period \u2013 for example, 60 percent or 70 percent to long-term goals. The rest can then be used to think about opportunities to accelerate achieving set goals, or take advantage of the natural opportunities that markets sometimes present.<\/p>\n\n\n\n

\u201cYour financial objectives develop as your life evolves,” says Lucar. \u201cAnd with markets evolving at the same time, you may capitalise on some opportunities and achieve your objectives faster than expected \u2013 take buying a house, for instance. You might then pivot your goals to achieving a more comfortable lifestyle.”<\/p>\n\n\n\n

Going after those opportunities should not, however, be interpreted as taking unnecessary risks. While you may have slightly different risk profiles for your timelines, your level of risk should be viewed in totality and aligned with a holistic wealth plan.<\/p>\n\n\n\n

Be more nimble and active<\/h2>\n\n\n\n

While some investors are happy with a buy-and-hold long-term investment strategy, taking advantage of short-term market opportunities typically requires a more nimble approach \u2013 in particular, identifying and acting on them. This is often a key hurdle for individual investors.<\/p>\n\n\n\n

Business owners and entrepreneurs, for example, may have less time to manage their portfolios. Similarly, they may not have enough investment knowledge or experience to identify the opportunities that they would readily invest in. RBC Wealth Management’s 2022 survey of high-net-worth individuals (HNWIs) aged 25-54 revealed that 84 percent needed guidance on diversifying how assets are held, with 76 percent of all respondents requiring support with investment management.<\/p>\n\n\n\n

For those investors who are happy to manage their own investments but don’t have the time to do the necessary research, an advisory service often helps fill the middle ground.<\/p>\n\n\n\n

\u201cBeing nimble doesn’t mean day trading and getting in and out of investments at speed,” says Storm. \u201cSome of these investments may be held for years. It also doesn’t mean diving into investments for fear of missing out without doing your due diligence. What it means is being alert to the opportunities and moving at the earliest opportunity.”<\/p>\n\n\n\n

When considering timelines and the need to be nimble, Lucar points to the LOQS investment framework \u2013 liquidity, opportunity, quality and stability \u2013 as a basis for portfolio positioning during periods of volatility.<\/p>\n\n\n\n