As we saw in 2020, having a disciplined and repeatable investment process in place can be especially important during periods of change and uncertainty, when managing your investments requires even more time and expertise.
"That’s where engaging professionals who are working on your behalf every day can really make a difference," said John Canally, CFA, a Chief Portfolio Strategist at TIAA.
According to Canally, as equity valuations remain at above-average levels and interest rates are near all-time lows, this has profound implications for portfolio construction going forward. Investors can expect much lower than average returns on both stocks and bonds in the next decade or so.
"That makes it critical to have a plan to generate income outside of the ways you might have done so previously,” he said. “For example, if you generated income through bonds or a basket of utility stocks in the past, that's going to be harder to do given where rates are now."
While promises of a vaccine jolted the markets upward in recent weeks, Canally believes little will change for the economy until a vaccine is widely available. As a result, broad diversification across countries and asset classes will remain important for investors seeking to manage portfolio risk in the months ahead.
“Back in the fall, we saw some countries reinstate full or partial lockdowns, while others took different approaches,” he said. "So, it's really difficult to navigate that from an investment standpoint. You would need to figure out which countries are going to shut down and for how long, and what impact that will have going forward. Investors are better off with a widely diversified portfolio that has exposure to all of those countries and all of those sectors, to take advantage of all the ups and downs."