MAB Quarterly Review Q1 2025 - Adventurous - Flipbook - Page 13
These are uncomfortable strategies and managing our emotions is crucial if we want to be successful longterm investors and achieve our long-term goals. There will always be concerns in the markets and we need to
train our emotions not to overreact, when at the peak and the trough.
Where are we now?
For some markets, we are in different territory than others. As you will have read in the performance
commentary, equity markets so far in 2025 have shown signi昀椀cant divergence. US equities have been negative
for the year, falling from lofty heights, while European, Asian and UK equities have provided positive returns.
However, the vast majority of media news 昀氀ow is negative and emotionally this will be triggering. This is the
point of the cycle where you need to focus on your 昀椀nancial plan. That is why it is important to talk to your
昀椀nancial planner, and read the important messages about the power of staying invested that we share on a
regular basis.
The importance of diversi昀椀cation
What this current market has also illustrated is the importance of diversi昀椀cation. Last year there was a clear
winner in the equity markets: US equities. This was driven by a handful of large companies, with a tailwind of
arti昀椀cial intelligence infrastructure build. This narrow band pushed US markets to record highs, and the US
equity index became more and more concentrated in this relatively small group of companies.
This also affected global equity markets, with some global equity indices that are based on the size of the
underlying companies, becoming over 70% made up of US companies. For us, this is a risk; and having too
much in a single area can end up being an unforeseen risk that is coming to fruition at this moment.
If you have an appropriately diversi昀椀ed portfolio, you will have had a positive return in 2024 and seen some
protection from the worst of the volatility to date in 2025. Relying on a small number of return drivers is a
dangerous strategy; but having more of your bases covered is a successful strategy over the long term.
As this ‘patchwork quilt’ graphic shows, asset classes over time move in and out of favour. US equities were
top in 2023 and 2024 but have at times been towards the bottom too. Following the blue and black patches
you will see our Balanced and Growth portfolios. If you are diversi昀椀ed and can navigate staying the course,
this will lead to good outcomes over the long term.
Concentration was arguably in favour last year; however, diversi昀椀cation is a clear winner so far in 2025. You
need two things to be a successful long-term investor: (1) an appropriately diversi昀椀ed, multi-asset portfolio,
and (2) a strong commitment to staying invested. Now is not the time to make short-term investment decisions
because of what you may be feeling. Now is the time to stay the course and bene昀椀t from a robust investment
plan and a long-term focus on investing. As we wrote last quarter, the best days in markets often happen
during the worst times.
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