A portfolio stress test applies past market shocks, such as the Global Financial Crisis (GFC), to your current asset allocation to estimate how much your portfolio could fall. It is a simple way to check whether your strategy, diversification and cash buffer would hold up in a downturn.
Here’s an investment truth that not everyone is focused on: when most Australian investors think they are diversifying globally, they are really just buying more US exposure.
A large and expanding portion of investors know their portfolio value to the dollar on any given day, yet they can’t tell you what their asset allocation is.
Ask most investors what determines their long-term returns and they’ll most likely talk about their asset allocation, the way they select their fund managers or their track records at getting macro calls right.
Markets have never lacked reasons to worry. There’s generally a long list of macro risks and challenges that need to be navigated. Yet the data on which investors succeed tells a clear story: cautious optimism has consistently outperformed pessimism.
The rich just keep getting richer. In Australia, the top 10% now control over 58% of national wealth, while the top 1% own almost half of the nation’s wealth.
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