May 16, 2013

Is Your Client a Skittish Investor? Russell Offers Calming Tool

Russell’s Asset Class Dashboard is designed to combat investors’ behavioral biases

Russell's Asset Class DashboardWith today’s uncertain market conditions, advisors can struggle to help clients set realistic expectations for portfolio performance and avoid obsessing over day-to-day market movements. With that in mind, Russell Investments has developed an Asset Class Dashboard that helps advisors show investors how to combat behavioral biases that might drive them to make bad decisions.

Russell’s new Asset Class Dashboard tool is now available on Russell’s Helping Advisors site. The new tool presents a simple visual that advisors can show to clients when talking about asset class performance.

The Asset Class Dashboard contrasts current 12-month returns with historical and typical returns for a sample of asset classes, as represented by relevant indexes.

“When guiding clients through this month’s update of the Asset Class Dashboard, you can observe that as was the case last month, the most recent 12-month returns for the asset classes (represented by indexes) included in the Asset Class Dashboard fell within their respective historical typical range (the blue range bar)—except  for cash, which still has historically low returns,” wrote Sophie Gilbert, director of Russell’s Capital Markets Insights, in a blog post.

Gilbert also spotted these trends in April:

  • Returns for many asset classes have moved even higher above their historical average than was the case in March. Twelve-month returns for Non-U.S. Equity and Global Real Estate made the biggest jumps.
  • Emerging Markets Equity returns remained below their historical average, but the most recent 12-month returns moved the asset class up closer toward its historical average again.
  • Returns for Emerging Markets Debt and Global Infrastructure, both below their historical averages for the prior month, moved above those respective averages for the most recent 12-month period.

“Of course, over time, we expect returns for all asset classes to revert to their respective historical mean,” Gilbert wrote. “But it’s anyone’s best guess when that might happen—and it’s more likely to be a gradual process rather than a sudden change.”

Read 3 Market Strategies for Advisors, Investors From Russell at AdvisorOne.

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