With the current market instability, your clients may ask you to help them review their investment allocation and maybe answer questions on the same matter.
The situation is evolving rapidly, and it is difficult to predict what will perform best for investors. However, some investment approaches can be particularly attractive in times of volatility. Here are a few.
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Diversifying Assets
Asset diversification, though always relevant, becomes even more important when markets are volatile. Encouraging your clients to adopt this strategy is still the most valuable advice you can give them.
The chart below* clearly illustrates how asset diversification can help reduce the impact of volatility and improve portfolio returns. It presents the main asset classes and their returns, in ascending order, by calendar year from 2007 to 2021. As we can see, each year the asset classes vary significantly.
*Source: Guide to the Markets (Q1 2022, p. 61) by JP Morgan.
Investment options to consider
Whether you want to diversify geographically, by asset class, by economic sectors or by currency, the iA fund offer has everything you need to build a well-diversified portfolio with sound risk management.
Here are some specific examples of funds that can improve the diversification of your clients' portfolios in volatile times.
One of the first segregated funds managed solutions in Canada that provides access to private alternative investments. These assets offer favourable risk-return characteristics, low correlations with traditional markets, and reduced volatility.
These funds invest via the stock market in companies owning infrastructure projects and real estate. Although these funds have some correlation with traditional stocks, real assets such as infrastructure and real estate have historically demonstrated good protection against inflation and low correlation with traditional asset classes.
This fund is less sensitive to interest rate movements than fixed-rate bonds. This is partly because floating rate loans have a duration of nearly zero (0) years and a variable rate.
- Managed and Index Solutions
Our five (5) families of managed solutions, plus our family of index solutions are designed to simplify your life. They require little intervention on your part and offer optimal diversification. Among these families, you will find the solution that best meets your client’s financial objectives and risk tolerance.
Other options can also be considered for building a portfolio that fits each investor’s profile.
For more details on every fund offered, you can always consult the “Know your Funds” brochure available in your Advisor Centre.
