Since the onset of the coronavirus crisis and ensuing economic downturn, it has been a volatile time in the market. But financial advisors have helped their clients keep their focus on the big picture, according to Matt Goulet, senior vice president for portfolio solutions at Fidelity Investments.
“In these uncertain times, advisors have really helped their clients ‘stay the course’ and remained focused on their long-term goals through the ups and downs of the market,” said Gouled in a statement.
According to recent research from Fidelity, there is friction between client objectives and their willingness to take risk. Yet, the coronavirus crisis has not encouraged clients to change asset allocation.
Recently, Fidelity analyzed a study by Callan Associates that measured expected return from various risk levels, beginning in 1995. According to the study, back in 1995 one could expect a 7.5% return by investing solely in bonds. Today, however, investors need to be much more diversified with much more complex portfolios if they are to expect similar returns, bonds, U.S. large- and small-cap stocks, international stocks, real estate, and other investments.
Portfolios have certainly grown more complex over the years. During the first half of 2020, the financial behemoth used its Fidelity Portfolio Quick Check to review 3,972 portfolios created for clients, and the average portfolio comprised 14 holdings, seven different asset managers and 61 basis points of underlying blended fees, according to Think Advisor.
According to the same article, the analysis concluded that 43% of the average fixed income portfolio was allocated to satellite positions, which were highly correlated to high yield and equities, vs. investment-grade core positions.
