Time to diversify

By Mike Brooks, Senior Investment Manager, Investment Solutions, Aberdeen Asset Management

In the eyes of many investors, bonds and equities enjoy a domestic relationship much like the man and woman in a traditional Alpine weather house. The female figure comes out with a sunshade when it’s dry, while the man comes out with a macintosh when it looks set to rain – and they are never out of the house at the same time.

It is often assumed that, in the same way, stock and bond values will not move together. Rises in one of the two asset classes have compensated for falls in the other and the overall performance of portfolios based on a simple blend of equities and publicly issued debt has been strong. On this rock of certainty many portfolios have been built.

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