Moving In Different Directions

Within NEPC’s 2014 Asset Allocation Letter, the author, NEPC’s Asset Allocation Committee, reminds us that investors often feel the emotional cost of diversification in the form of “missing out” on return when equity markets rally. The recent robust performance may tempt some investors to chase results. They remind us that investors, instead, must consider moving in a different direction.

With market divergence on the horizon, the sequence of actions by central bankers, countries, and investors sets the stage for distinctive events and conditions over the next several years. Investors able to provide patient long-term capital should expect to be compensated for their foresight. They are likely to benefit in the future as these divergences play out and opportunities emerge. 

It is especially in these times that investors must consider a different direction than what has worked recently. By moving in that different direction, while tapping the wisdom of time-honored investment principles, investors can look to the future with confidence.