Why Investors Should Diversify
- Individual and professional investors are negative and cautious on the market.
- But individual investor allocations to equities remain near 20-year, if not 35-year, highs. Investors might be bearish, but they’re not budging on allocations.
- Short-term concerns on inflation, recession, and market volatility remain valid, but long-term investors should still invest in risk assets — and aggressively diversify.
- Why invest? Longer-term expected returns for both stocks and bonds have improved.
- Stocks: Prices are now 20-30% lower than they were just six months ago.
- Intermediate-term bonds: 3% yields are clearly better than the sub-1% yields from just 18 months ago.
- Why diversify? The future, as always, is uncertain. Economic and market storm clouds remain.
- Diversification includes investing in other asset classes, such as alternatives and real assets.
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