In this article Dan Miles discusses how market downturns have real repercussions on a portfolio’s returns, with investors paying a price they often aren’t even aware of. This is why managing volatility is so important particularly for retirees who are more vulnerable to sequencing risk and loss aversion (which can lead to destructive investor behaviour). So at Innova, we construct portfolios to work with investor behaviour rather than against it. We focus on managing risk first and therefore actively positioned our portfolios defensively before the initial COVID-19 drawdown in early-2020, and then added to our equities exposure when those assets were cheap (and therefore less risky). This shows that managing risk allows investors to reap the benefits of more sustainable portfolio returns.
Portfolio Insights February 2022 – How managing risk directly boosts returns
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