This downside management toolkit keeps you informed of the latest market events; shares how we have been managing downside risk in our portfolios; and equips you with important truths to hold on to while markets bounce through turbulent times.
What's happening in markets
Momentum vs Asymmetry: Why downside management strategies are even more important now
Developed economies are in the “sweet spot” of moderately above-trend growth, continuing low inflation and easy monetary policy. However, we believe U.S. share markets are extremely expensive relative to historical levels which makes the market vulnerable to any unwelcome news.
At current valuations, our analysis suggests the upside potential is limited, and the drawdown potential could be significant.Read more
MARKET WEEK IN REVIEW
Weekly market update on global investment news in a quick five-minute video format featuring some of our top investment professionals.
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Preparing for a low return, high volatility environment
Our strategists have consistently advised caution about the outlook for markets as valuations become increasingly extreme and vulnerable to correction.
How Russell Investments manages downside risk
At Russell Investments, we help investors manage downside risk in 3 ways - diversify sources of returns, use a robust dynamic asset allocation process to guide tactical positioning and seek effective implementation capabilities. We have been anticipating a low return, high volatility environment for the last 2-3 years. Accordingly, we have been dynamically adjusting our portfolio positioning to manage downside risk.
Multi-asset quarterly review
Andrew Sneddon, Managing Director – Multi-Asset Solutions, discusses Russell Investments’ performance in the latest quarter and how our investment outlook impacts our portfolio positioning.
Umbrellas for a rainy day: Why options can be better than cash to manage downside risks
Markets are now in the 9th year of the global bull run since the global financial crisis troughs in March 2009. As equity markets continue rising to increasingly extreme valuations, more and more investors are employing downside protection strategies to manage the risk of loss.
The search for returns: the low-return imperative
We believe the search for returns is not going to get any easier against a backdrop of high U.S. equity prices, narrow credit spreads and low bond yields. When expected future market returns are likely to be lower than the required rate of return, we believe an investor cannot afford to ignore any investment strategy that may offer incremental return, take on risks they do not expect to get paid for or disregard implementation efficiency.
Why downside protection may matter more than upside growth
The global macroeconomics and geopolitical outlook remains uncertain, suggesting that an environment of low rate, low growth, and high valuations may linger. Against this backdrop, preserving capital may be more important than seeking the growth of capital, because, in the investing world, losing less means requiring less to bounce back.
Downside protection: What, why, who, how and when?
Downside protection is an important aspect of risk management that should be considered for all portfolios. Downside protection strategies aim to reduce the frequency and/or magnitude of capital losses, resulting from significant asset market declines.
Resources for advisers and end investors
Keep calm in volatile markets: cycle of market emotions
The key to successful investing is to buy low and sell high. But more often than not, investors do the exact opposite. The reason? Investors are human. For example, many panic and cash out when markets fall. Ironically, at these times, these investors fail to recognise they are actually at the point of maximum financial opportunity.
Markets bounce back after shocks
A look at share market performance 12-24 months after some of the sharpest declines of the past 40 years. The strong historical tendency of markets to rebound after market shocks provides some evidence against fear-induced dramatic alterations to asset allocations.
Investors facing volatile markets need skill, scale and discipline
Correctly timing when to get out of – and back into – the market is tricky. Get out right after a ‘worst’ day, and you might not get back in soon enough to catch a ‘best’ day. Such mistiming can have a significant impact on potential portfolio returns.
Standing at the crossroads: An investor’s choice of response after market turmoil
We compare the portfolio values of two investors for the last 10 years: one who switched to cash after the global financial crisis, the other staying invested in a diversified multi-asset portfolio.
7 things successful investors do in volatile times
In a world where we expect the 'low return/high volatility' theme to continue for some time, we will likely see another 'Great Wealth Transfer' from the impatient to the patient investor. The impatient will chase the highs and exit at the lows, while the patient will withstand the temptation to 'chase'.