The COVID-19 pandemic is the type of unpredictable market event that can strike quickly and cause significant damage to portfolios. While such black swan events and bear market events are unpredictable, they are also inevitable. The question becomes, how are you prepared for such market crises?
Intelligent, rational investors made some missteps prior to this crisis, and in previous crises like the Global Financial Crisis, that resulted in significant losses of wealth. Many of the missteps are a result of popular misconceptions regarding major market events, diversification, and risk.
Unfortunately, many years later, these misconceptions still lay at the foundation of portfolio construction and expectations.
As the global response takes shape, investors have the opportunity to identify and understand these misconceptions, and then redefine portfolio construction and risk management, so investors can be better prepared for the next major market event.