The first quarter of 2022 has challenged investors with plenty of market volatility, and it would be foolish to expect the rest of the year to be a smooth ride.are giving you heartburn, your risk appetite and your portfolio’s asset allocation are probably misaligned and in need of attention.
Rather, it is the asset allocation decisions you make and stick with year on year that will drive solid long-term investment outcomes. The core portfolio should be as diversified as possible, holding a mix of stocks, bonds and other assets across a variety of geographies, sectors and industries. Index funds or ETFs can fill this role, holding hundreds or thousands of individual securities and minimising the chance of any specific one affecting its overall performance.Your whole portfolio should also match your risk profile.
While carving out a small portion of your portfolio for active investing in the satellite portion isn’t backed up by academic studies, it may be helpful to some behaviourally. It could help you avoid tinkering with the core and free up the satellite portion to pursue other opportunities – whether that’s an interest in stock picking or sectors or other elements you feel strongly about.