A balanced global investment strategy may help mitigate the longer-term impact of negative events on disciplined investors. The chart below shows performance of a balanced investment strategy following a few historical crises. Each crisis is labeled with the month and year that it occurred or peaked. The subsequent one-, three-, and five-year cumulative returns start from the first day of the month following each crisis.
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Although a global investment strategy would have suffered losses immediately following most events, the financial markets recovered over time, as indicated by the positive three- and five-year cumulative returns.
Negative events such as these may tempt investors to flee the financial markets. But diversification and a long-term perspective can help investors apply discipline to ride out the storm.
Composition of the Normal Balanced Strategy
7.5% S&P 500 Index
7.5% Fama/French US Large Cap Value Index
7.5% Fama/French US Small Cap Value Index
7.5% CRSP 6-10 Index
15% Fama/French International Value Index (7/81–12/10) and MSCI World ex USA Value (1/11–9/11)
15% International Small Cap Index
40% Merrill Lynch One-Year US Treasury Note Index
Disclaimer: The information contained herein is intended to be educational and informational in nature only and has been obtained from sources believed reliable but is not necessarily complete and cannot be guaranteed. This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Readers are encouraged to consult with their accountant, financial advisor, attorney or other professional. The opinions expressed herein are dated and subject to change over a period of time. Neither the information presented nor any opinion expressed constitutes a representation by Sensenig Capital Advisors, Inc. or a solicitation of the purchase or sale of securities. No professional services are deemed rendered to the readers of this blog.
The Market’s Response to Crisis
A balanced global investment strategy may help mitigate the longer-term impact of negative events on disciplined investors. The chart below shows performance of a balanced investment strategy following a few historical crises. Each crisis is labeled with the month and year that it occurred or peaked. The subsequent one-, three-, and five-year cumulative returns start from the first day of the month following each crisis.
Click to enlarge
Although a global investment strategy would have suffered losses immediately following most events, the financial markets recovered over time, as indicated by the positive three- and five-year cumulative returns.
Negative events such as these may tempt investors to flee the financial markets. But diversification and a long-term perspective can help investors apply discipline to ride out the storm.
Composition of the Normal Balanced Strategy
7.5% S&P 500 Index 7.5% Fama/French US Large Cap Value Index 7.5% Fama/French US Small Cap Value Index 7.5% CRSP 6-10 Index 15% Fama/French International Value Index (7/81–12/10) and MSCI World ex USA Value (1/11–9/11) 15% International Small Cap Index 40% Merrill Lynch One-Year US Treasury Note IndexDisclaimer: The information contained herein is intended to be educational and informational in nature only and has been obtained from sources believed reliable but is not necessarily complete and cannot be guaranteed. This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Readers are encouraged to consult with their accountant, financial advisor, attorney or other professional. The opinions expressed herein are dated and subject to change over a period of time. Neither the information presented nor any opinion expressed constitutes a representation by Sensenig Capital Advisors, Inc. or a solicitation of the purchase or sale of securities. No professional services are deemed rendered to the readers of this blog.