When asked what advisors should tell clients who want to make adjustments to their portfolios in light of the recent market volatility, Chris Brightman says “it’s easy to say, harder to do” to stay the course in a diversified portfolio when bond yields are so low and equities are being battered.
It’s difficult for individual investors to follow Warren Buffett’s dictum to be “fearful when others are greedy and greedy when others are fearful,” he says, but knowing that “fear creates lower prices,” advisors should be looking for investing opportunities when the overall markets are tottering.
However, the Research Affiliates chief investment officer said in an interview Thursday that now and in the future, a diversified portfolio without a hefty exposure to non-U.S. equities isn’t a diversified portfolio at all.
A strategy of investing in a broadly diversified portfolio of non-U.S. equities presents “very attractive future return prospects from today’s prices,” he says. Most U.S. investors have a heavy home-market bias, Brightman says, which leaves their portfolios “poorly diversified.”
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So what should investors be doing now, and what should advisors be counseling clients to do during this volatile time?
“You should be rebalancing” your portfolio to take advantage of cheaper stocks, Brightman says, stressing that “volatility creates opportunity, not risk.”