The past few years have been a lesson in volatility for many investors. Public markets have moved sharply in both directions, and private equity, an asset class that many high-net-worth investors have added to their portfolios over the past decade, has faced a difficult stretch marked by extensive financial-press coverage.
Periods like this are a useful reminder of an approach that has helped guide investors through various market cycles: evidence-based, globally diversified investing rooted in rigorous academic research.
Why Evidence-Based Investing Starts With Diversification
Evidence-based investing draws on decades of academic research rather than on forecasts, headlines, or attempts to predict which asset class, sector, or manager will outperform next. In practice, it emphasizes broad global diversification, managing costs, and the benefits of disciplined planning.
Reducing Concentration and Risk
A concentrated position in a single company, sector, or asset class can expose a portfolio to unnecessary risks that a broader mix traditionally would not carry. By spreading risk across a wide range of companies, industries, and regions, global diversification can help insulate the broader portfolio from the downfall of any single investment.
Participating in Global Markets
A portfolio limited to domestic markets alone excludes access to the majority of the world’s investable companies. A globally diversified allocation can give investors exposure to growth opportunities across both developed and emerging markets, rather than tying outcomes to a single country’s economy.
The Advantages of Investing in Public Markets
Public markets offer structural advantages that can be difficult to replicate in less-liquid, less-regulated corners of the market.
Liquidity
Publicly traded securities can generally be bought or sold on any trading day. That liquidity can give investors flexibility to rebalance, meet cash needs, or adjust a portfolio as circumstances change, without being locked into a multi-year holding period.
Transparency
Public companies are subject to standardized disclosure and reporting requirements. Investors can generally review audited financials, governance practices, and material events on a regular, predictable schedule, information that is often more limited for private holdings.
Robust, Ongoing Price Evaluation
Public market prices are set continuously by millions of buyers and sellers, incorporating new information in real time. That broad, ongoing evaluation can offer a more reliable read on a holding’s value than periodic, self-reported valuations.
The Smith Bruer Perspective
We build portfolios around evidence, not headlines. As fee-only fiduciary advisors, we are compensated only by our clients and accept no commissions or third-party incentives, which allows our guidance to remain aligned with your interests 100% of the time.
A globally diversified, evidence-based portfolio will not eliminate volatility, but it can help position high-net-worth investors to participate in global growth while managing risk deliberately, rather than reactively.
We serve clients in Tallahassee, Colorado Springs, and across the country. If recent market volatility has you reconsidering your portfolio’s structure, start the conversation today.
