WHY A CONSERVATIVE APPROACH?
Looking at the returns and volatility of different asset classes as well as “conservative” and “balanced” approaches, a conservative approach – with 80% bonds and cash and 20% equities and real estate investment trusts (REITs) – has demonstrated lower volatility over a longer horizon while delivering better returns than cash.
Source: Bloomberg Finance L.P., Dow Jones, FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. APxJ: Asia Pacific ex-Japan. DM: developed market. EM: emerging market. HY: high yield. REITs: real estate investment trusts.
Hypothetical portfolios were created to illustrate different risk/return profiles and are not meant to represent actual asset allocation. USD total return calculations are based on MSCI Total Return, Bloomberg Barclays and J.P. Morgan indices. APxJ equities stands for MSCI AC Asia Pacific ex-Japan. *Monthly total returns between 31.03.2004 and 31.03.2019 used for all asset classes.
Guide to the Markets – Asia 2Q 2019, page 70. Data reflect most recently available as of 31.03.2019. Past performance is not indicative of future performance.
MARKET VOLATILITY EXPECTED TO INCREASE
While risks remain heightened with trade conflicts between the US and other economies, Brexit and other geopolitical concerns, how the US economy will perform will also have an impact on the rest of the world.
In the Asia-Pacific (ex-Japan) equity market, there have been years with positive return despite sizeable intra-year decline. Volatility is an inherent feature of stock markets that a wise investor would learn to accept and live with.
Source: FactSet, MSCI, J.P. Morgan Asset Management. Returns are price returns based on MSCI AC Asia Pacific ex-Japan Index in USD terms. Intra-year decline is the largest peak to trough decline during the respective year. Returns shown are calendar year returns from 1988 to 2018. Guide to the Markets – Asia 2Q 2019, page 67. Data reflect most recently available as of 31.03.2019. Past performance is not indicative of future performance.
CASH IS NOT ALWAYS KING
In Hong Kong, the real return on cash has not been favourable. Taking into consideration the impact of year-over-year inflation, the real return of cash has been negative over varying horizons.
Not putting one’s money to work may mean letting inflation erode one’s wealth and purchasing power. Investing in other asset classes based on one’s risk tolerance level may be worth considering.
Source: FactSet, various central banks, IMF, J.P. Morgan Asset Management.
*Post crisis time period defined as 2008-2014. Post 1st Fed rate hike defined as 2015-2018.
Guide to the Markets – Asia 2Q 2019, page 65. Data reflect most recently available as of 31.03.2019.
WHY INVEST IN THE JPMORGAN MULTI BALANCED FUND ?
Why now for a conservative multi-asset strategy
In a volatile market environment when risk management and diversification are crucial, a conservative multi-asset strategy could be an option.