Positioning your portfolio in turbulent times

Lincoln Indicators
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Lincoln Indicators

Mar 8th, 2022
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As any experienced investor knows, all investment markets have ups and downs. Regardless of investor experience, turbulent times are a cause of anxiety, leading to poor decision-making. So if turbulent markets are inevitable, even if their timing is not predictable, how should portfolios be positioned in anticipation of and respond to market volatility?

What’s your objective?

First up, it’s important to go back to your investment objective. Is it to grow wealth over the medium to long term? Or are you more concerned with preserving capital? Your objective also needs to take into account your risk profile. How would you feel if, for example, the value of your portfolio dropped by 20%? Would it lead to you dumping volatile investments such as stocks, or would you see it as an opportunity to pick up some quality stocks at a discount?

With your risk tolerance and objectives clarified, it’s time to get your grips with asset allocation. This is the process of deciding what proportion of your portfolio will be allocated to each primary asset class: cash, fixed interest, property, and stocks. Some investors will also allocate funds to investments such as gold and managed investment funds.

Asset allocation is the engine room of your portfolio. The goal of allocating your assets is to minimize risk while meeting the level of return you expect. The percentage of your portfolio you devote to each depends on your time frame and your risk tolerance.

Asset allocation is also your crucial risk management tool as it determines the level of diversification across asset classes. However, the risk isn’t always a bad thing in this context. A higher risk portfolio may at times fall more in value than a lower risks portfolio, but it is also more likely to generate higher returns over the long term.


Unfortunately, the motivation to position a portfolio for turbulent times is often a sudden upset in investment markets. But this doesn’t mean it’s too late to do anything. If your investment objectives and risk tolerance haven’t changed, rebalancing your portfolio (i.e. bringing the asset allocation back to its ideal position) may help position your portfolio for the next upswing in investment markets.

Waiting out the storms

While positioning can help with portfolio risk management, many investors opt to wait out any storms. Why? Because of all the ups and downs, bull markets and bear markets, bubbles and crashes, major share markets have delivered solid long-term growth. In fact, it has been claimed that investors have lost more money trying to anticipate corrections than they would have lost in riding out actual corrections.

Make confident decisions

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Lincoln Indicators
Written by

Lincoln Indicators

Mar 8th, 2022
Related topics
Information in this communication is current as of publication unless otherwise stated. It is provided for educational purposes only and may not reflect current market data or opinion. It should not be relied upon in respect to any current investment decision. Investments can go up and down. Past performance is not a reliable indicator of future performance.

Important: This communication is provided by or on behalf of Lincoln Indicators Pty Limited ABN 23 006 715 573 (Lincoln), as Corporate Authorised Representative of Lincoln Financial Group Pty Ltd ABN 70 609 751 966, AFSL 483167 for information and educational purposes only. This content may contain general financial product advice. It has been prepared without taking account of your personal circumstances and you should therefore consider its appropriateness in light of your objectives, financial situation and needs, before acting on it. Investments can go up and down. Past performance is not a reliable indicator of future performance. Shares and other investments may go up and down in value, and their past performance may not be repeated and gives no guarantee of future performance. Information in this communication was current as at the date of its preparation, unless otherwise stated, and may be subject to change.

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