You could be forgiven for thinking as much, especially lately, because there hasn’t been a great deal of news about the sharemarket – probably because it’s been slowly creeping upwards.
This possibly means the horrors of April, May and June, haven’t been erased from your mind.
For some people, the tales of doom would have been so overwhelming that they bit the bullet and sold everything during that horror quarter.
Unfortunately, that means they probably sold at the bottom and they may have been overweight with equities to begin with, ignoring the importance of a balanced portfolio.
Bonds have provided a pretty handy buffer against equity volatility this year.
And there’s something else – despite the wild ride and blood curdling headlines they’ve prompted, equities are still in the black, actually outperforming the current safe haven of cash.
So let’s look back and view this year through a couple of different angles.
Firstly the bad times of April, May and June.
While many individual stocks copped a hammering, the total return including income and growth from the ASX 300 Accumulation Index was -5.02%.
And the UBS Warburg Australian Bond Composite Index returned 4.57% from income and growth across the same period.
As you can see, including bonds in a portfolio would have significantly lowered volatility, lessening the need to be concerned about those wild months.
And now for the brighter news of the year to date (or at least until the end of July).
The total income and growth return of bonds till the end of July was 5.79% and total return for the ASX Accumulation Index was 7.46%, a result which would surprise many people.
This is an example why portfolios need a mix of bond funds, equity funds, real estate investment trusts and cash.
Not every asset performs the same way, so portfolio diversification frees you from the stress of daily market gyrations and the headlines that accompany them.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. Need help with your financial your financial future, we think we’re the best financial adviser in Australia.
