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Staying Balanced Amid Market Volatility
For many investors, the virtues of diversification were more than a little tarnished by the bull market of the 1990s. Growth stocks so dominated the market that many people resisted diversifying even a small portion of assets away from that area, since they believed it would serve only to reduce their returns. Its effectiveness in reducing their portfolio's overall volatility was discounted in a market where the downside seemed simply nonexistent. In today's market, however, diversification is back in the spotlight.
Ever since the market showed that it, too, is susceptible to gravity, investors have once again recognized that pinning all your hopes on a single stock or a single strategy isn't a one-way street to riches. It's not surprising that investors need diversification the most, want it the most, and need to understand it the most in a time of increasing volatility and uncertainty such as this one.
Hedging your bets
The principle behind diversification is simple: It's difficult, if not impossible, for any investor to consistently predict which style, strategy or area of the market will be the hottest one in the next few months. By diversifying your assets, you don't need to feel that you've missed out on the big game in town. Conversely, you can be less concerned if one particular component of your portfolio doesn't perform well over the short term.
Russell's brand of in-depth diversification
Although building a diversified portfolio may seem simple in principle, it's a good deal more complicated in practice. At Russell, we start by identifying the best managers in each asset class and investment style through intensive, first-person research. This high level of due diligence enables us to combine them in portfolios where their style, strategy and particular area of expertise complement each other's. Then we continuously monitor these managers to ensure that they still merit a place in the portfolio. Occasionally, we terminate a manager if it no longer meets our criteria.
Russell caters to people who are looking for a long-term investment plan with a high degree of certainty of achieving its goal at the end of the horizon. Russell's dynamic brand of in-depth diversification — across asset classes, investment styles and managers — is designed to be a safeguard against market volatility. Time and again, we have found that this sensible approach gives investors the confidence to withstand downturns in any one area of their portfolio so that they can meet their investment goals. Diversification may have fallen out of fashion during the bull market, but at Russell it never goes out of style.
For further information about these contents, please contact Russell Investments Canada Limited.
Copyright© Russell Investments Canada Limited 2001. All rights reserved. See 'Important Legal Information.' Date of first use: 01/22/01.
This is a publication of Russell Investments Canada Limited 2001. It should not be construed as investment, legal, or tax advice. The contents are intended for general information purposes only, and you are urged to consult your own investment, legal, or tax advisor concerning your own situation and any specific investment questions you may have.
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