Are you among the investors asking themselves: Is a radically new investment strategy warranted to deal with the challenging investment mix of continuing low interest rates, higher market volatility and subdued returns from diversified portfolios?
To the contrary, Vanguard’s economic and market outlook for 2019 and beyond emphasises that disciplined, diversified and patient investors who concentrate on factors within their control are likely to be rewarded over the long term.
In other words, the case for adhering to sound investment practices is compelling and a radical new approach is not needed.
Vanguard’s latest outlook warns that investors making short-term tilts to their portfolios’ asset allocations in an attempt to boost returns are unlikely to “escape the strong gravity of low-return forces in play as they ignore the benefits of diversification”.
In short, take a total-portfolio approach to investing rather than looking at different asset classes in isolation.
Further, the report suggests that a series of factors under investors’ long-term control are likely to “far outweigh” ad-hoc, short-term tilts to a portfolio.
Such under-your-control factors include:
Save more: The straightforward strategy of saving more when possible can have one of the biggest impacts on the likelihood of our investment success. For many of us, this may begin with increasing our salary-sacrificed super contributions.
Spend less: Our ability to reduce spending much depends, of course, on our personal circumstances. Yet many of us can keep a better control on our spending. And minimising investment costs should be a key focus of investors.
Work longer before retiring: A longer working life, if feasible, provides a chance to save more for what will be a shorter and, therefore, less-costly retirement. And the continuing income from working past traditional retirement ages should help investors cope with a low-interest, subdued-return and more volatile investment outlook.
The adage that investors should concentrate on what they can control – not on what they can't – makes even more sense when investment conditions are more challenging. A shiny new approach to investing is not required.
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By Robin Bowerman, Head of Corporate Affairs at Vanguard
Reproduced with permission of Vanguard Investments Australia Ltd
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