Important as it is to avoid making rash decisions in a sell-off, I can think of three big questions we should ask ourselves when markets get rocky.
- Has the cause of the volatility, if obvious, undermined the investment thesis for any of your holdings?
- Does recent performance suggest your portfolio is diversified enough?
- And which defensive assets work when investors lose their heads?
The first two questions seem especially pressing for investors who may quite easily have allowed their portfolios to become overly skewed to some of the leading stocks, funds and sectors of recent years. But in the context of a rough 2022, I’d like to address the third question.