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Diversification and Pivoting in Volatile Markets with the Help of Investment Funds

Personal_Finance / Investing 2022 Apr 30, 2022 - 06:09 PM GMT

By: Submissions


The investment markets are prone to volatility and swings. Anyone with any experience knows and accepts these facts. What’s also important to understand is that no two markets always move in unison. When ETFs are performing well, commodities might be struggling. Fortunately, the financial world is vast and varied. That means you can and often should diversify and move between the available markets to take advantage of swings.

Naturally, there are never any guarantees. What’s more, you shouldn’t invest in markets you don’t fully understand. However, the point here is that you can move from stocks to commodities, for example, at will. Therefore, when certain markets are struggling, why not focus on something else. A practical example of this is the S&P 500. The US index dropped 4.9% in the first quarter of 2022.

That’s a significant drop and one that may tempt investors to consider other markets. Those other markets could be shares in individual companies, commodities, such as oil, gas and gold, futures or something else. For the experienced investor, pivoting from one market to another might be fairly easy. However, if you’re a novice, finding something outside of your initial area of focus can be tricky. This is where financial products, such as investment funds, can be useful. An investment trust is an actively managed fund that includes a variety of assets.

Investment Funds Help You Diversify

Basically, when you’re investing in investment trusts, you’re handing over the reins of power to someone else. That someone else is a regulated company that uses investor funds to speculate on a variety of assets. These assets can include shares, property, and other financial instruments. Thus, by investing in an investment trust, you’re automatically diversifying your portfolio. The upshot of this is that you don’t have to manually pivot from one market to another because you have interests in a variety of markets. What’s more, you have a fund manager that’s paid to monitor the markets and make changes as they deem appropriate.

Naturally, a potential downside of investing in an investment trust is that you don’t have control over the assets your money is being used to speculate on. However, you do have control over the funds you invest in. That’s why it’s important to look through the available funds, what they offer, and their performances overtime to find the best options. Indeed, one goal here is to take advantage of the financial world’s variety. You want a fund that covers a diverse range of assets and, in turn, will quickly pivot when necessary.

No investment fund can guarantee a return. However, these products offer a way for investors to cover multiple assets with a single investment. This can be useful during times of volatility. When certain markets are struggling, others could be thriving. That’s why you need a diverse portfolio and the ability to pivot when necessary. Doing this alone can be difficult, particularly if you’re a new investor. Therefore, it's useful to rely on investment funds and fund managers. They don’t always get it right, but they do provide a service that can offer

By ICS Digital

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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