Volatility & Asset Allocation: The Art of Balancing Risk and Reward

Markets, Strategies

This may seem like an overly simplistic point to make, but I believe it’s crucial when it comes to understanding asset allocation: the importance of volatility.

Looking at a chart I created comparing the S&P 500 (stocks) and Bitcoin (although it doesn’t have to be Bitcoin in particular, just any volatile asset), I immediately notice two things.

  1. Bitcoin is outperforming dramatically at this point of 2023 (despite underperforming last year) and
  2. The amount of volatility I see

A lot of the investors I talk to have not yet fully grasped the volatility aspect of an asset. 

When we allocate to an asset that has upside or downside potential, it is typically the volatility that messes with our heads and our profit and loss. 

For example, someone could have made the argument that Bitcoin would go up this year. While so far that has been true, there have also been massive movements to the downside within that same timeframe.

And is during those times of downside when the most mistakes happen.

Here’s what investors should do…

In today’s 2-minute video, I explain what investors should do to offset volatile times, historically the best way to make money and the number one thing investors should do to avoid volatility. 

I release these weekly tips every Thursday for free, so stay tuned and stay subscribed here. 

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