Issue link: https://mbozikis.ufcontent.com/i/1488214
RETURN CHASER Sharpe Ratio: 0.22 CONTRARIAN Sharpe Ratio: - 0.00 DIVERSIFIER Sharpe Ratio: 0.71 ■ Annualized Return ■ Risk (Standard Deviation) ANNUALIZED RETURN AND RISK 2.1% - 0.8% 4.8% 9.6% 14.2% 6.8% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Sources: Index providers, SEI. Past performance is not a guarantee of future results. It's not always easy to do the right thing This tells us that return chaser and contrarian strategies are double-edged swords. While they may offer a better chance of outperforming many asset classes and diversified portfolios, they also impose a higher probability of significantly underperforming over the long term. Meanwhile, the relative stability conferred by a diversified strategy may help to avoid significant losses while potentially reducing the overall volatility of the investment experience. And portfolios that can avoid extreme losses while enjoying lower volatility tend to outperform in the long run. This is why we continue to preach diversification. It may seem boring, and while past performance isn't a guarantee of future results, data from the past 10 years illustrates that diversified strategies have offered benefits that the other approaches have failed to provide. Diversification: The Boring Winner Historically, the result is a less-volatile portfolio that tends to produce something close to middle-of-the-road performance year in and year out. This is in contrast to the best- and worst-performing asset classes, which often generate significant media attention despite volatility in returns and market leadership—hence the sentiment that diversification is rather boring. So what's next? Don't put all your eggs in one basket › Diversification may be the best tool to help you ride out market volatility and have a better investment experience. › Staying invested in a diversified portfolio of equities and fixed income, with asset allocation suitable for your investment objectives, can be the best way to help you reach your investment goals and stay the course through all markets. › Consider investing in an all-in-one portfolio solution, where you can get a fully diversified portfolio, and leave the investment decisions up to professional money managers. FIGURE 3