Don’t Let Volatility Distract You From Diversification

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Twenty-seven years ago this month the stock market plunged. Investors dubbed that horrible day Black Monday. Many investors may remember the more than 33 percent drop from August through the beginning of December that year; but do they remember that in 1987 the S&P 500 actually ended the year in positive return territory? In 1987 the market was up 2 percent. This year October 2014 started out on a bad note, however, as of this week the S&P 500 has turned positive for the month. Large caps are not the big story here. It’s actually small caps that have soared, up 4.7 percent for the month and are now positive YTD. Global Reits are also up 4.7 percent for October and over 12 percent YTD. Diversification works. Gaming diversification and market timing doesn’t work. Please see an example of a globally diversified portfolio on page 5 of the Global Perspectives book.

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