Gold Core

Current markets and the effect on GoldCore Portfolios

Published by under Portfolios |

Financial Markets are once again testing investor's nerves with the Euro currently at around a four year low against the dollar. It is perhaps the speed of the recent declines that has caused the most anxiety amongst our clients. We have therefore considered the recent market volatility and the impact on GoldCore's portfolios to reassure our clients that once again diversification is the only free lunch in investing.

Bonds

The bond element of the portfolios is intended to reduce risk and provide liquidity. The focus on low volatility and high credit worthiness is deliberate. We view the portfolio as a whole “risk budget” and believe that investors are better rewarded by spending their risk budget in equities rather than chasing a higher return by purchasing longer term bonds or junk bonds. The recent performance of the Dimensional Global Short-dated Fixed Interest fund is illustrated below:

Source: DFA

Clearly, this fund has performed as required offering the prospects of a better return than cash deposits but with a high degree of stability.

Equities

Equity investment is provided through three primary investment vehicles Global Core Equity, Global Targeted Value and Emerging Markets Value and the recent performance of these funds for a € investor is as follows:

Global Core Equity

Global Targeted Value

Emerging Markets Value

Source: DFA

Conclusion

Market volatility is part and parcel of the investment experience. Investors must steel themselves for periods when their investments will fall in value (sometimes substantially). Risk and return are related, in order to be able to pick up the potential of a year to date return of 11% or 20%, investors must be willing to bear the risks of the occassional loss.

Returns are being driven by risk and therefore any attempt to reduce risk (on average) will reduce returns.
Trying to jump in and out of the market in an attempt to avoid losses more often than not simply results in reduced overall returns through higher trading costs and missing the days when the market goes up.

Remaining focused on the long-term goals is the most important issue for every investor.
The news is simply a distraction to the long-term business of investing.