In times of market volatility, an important concern of most investors is the preservation of capital and protection from downside risk. Ideally, a well-planned investment strategy is equipped to minimize portfolio risk with discipline and diversification.
Various asset classes typically perform differently under the same market conditions. While there will be periods in time when no level of diversification may protect investors from market corrections, diversifying across asset classes and regions may generally help reduce portfolio volatility. The objective is to help smooth returns and limit potential losses from overexposure to volatility in individual market segments.
While diversification is an essential investment strategy, it’s only effective if you stay invested through all market conditions. To achieve your investment goals, a steadfast focus on long-term investment goals is required. Making changes to a portfolio in response to market movements can be costly; thinking in the short-term can cause investors to miss out on the gains when the markets recover in the long- term.
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