Differentiation helps a portfolio reduce risk as well as achieve maximum return by taking advantage of exposure to many different markets. Historically, the returns between different asset classes differ and at XSpot Wealth we aim to have positions each time in the asset classes that create higher profitability with proportionally less risk.
The average annual return of major asset classes over the last 30 years
Below it becomes clear below that investing in the right asset classes and with the appropriate quota, is the most basic parameter for achieving returns and avoiding high risk in investments.
Timing and Investments
The concept of timing in the markets is one of the issues that, in our view, unjustly concerns investors. This is usually due to the prevailing news and regards investors who in one way or another are actively involved in investments, mainly by buying stocks.
Time (TIME) and not the right time point (TIMING) is what really contributes to the long-term result of a portfolio. The longer the time period of investing with a suitable allocation, the more profitable the portfolio. According to the data of a very detailed study, the course of the portfolio depends on a shocking degree on one parameter: the right asset allocation.
Over 91% of the total return on a portfolio is owed to the right mix of stocks, bonds, cash and other investments
Allocation instead of stock picking
Research conducted by JP Morgan on Russell 3000, between 1980 and 2019, concluded that: if we calculate the risk / adjusted returns, 75% of investors would have better results if they just followed a diversified portfolio.
The stock picking strategy has really zero contribution to the performance of a portfolio, as we pointed out above, and the most typical example is that in a time horizon of 15 years only 8% of professionals can offer better returns than the index, using stock picking.
What if the timing is really wrong?
If one can estimate that the markets are in a very bad timing, we would advise him with the following simple thing: to adapt and be ready.
If we assume that the timing is not correct, then as XSpot Wealth we would suggest a portfolio which considers 50% Growth and 50% Conservative. The combined stress test of Bloomberg and JP Morgan Portfolio Services, shows what would be the behavior of this mixed portfolio during the crises of 2015, 2016, 2018 and 2020.
This document does not constitute and shall not be construed as a prospectus, advertisement, public offering, or placement of, nor a recommendation to buy, sell, hold or solicit, any investment, security, other financial instrument or other product or service. This document is for general information only and is not intended as investment advice or any other specific recommendation as to any particular course of action or inaction.