The bird in the hand or two in the bush?
by Kirsten Boldarin
If you’re a diversified investor you’re probably thinking: at least I had fixed income as a back-up, bonds move contrary to equities in periods of stress? Sadly not this time. The New Zealand Government Bond index lost 14%[2] over that period.
And yet, these declines did not come on the back of a material slowdown in growth. In fact, global growth remained remarkably resilient in the face of rising interest rates, a war in Ukraine (and now the Israel Hamas war), and a cost-of-living crisis. The much-forecasted US recession has remained elusive. With cash finally paying an attractive rate, many investors opted not to take on market risk. A bird in the hand is worth two in the bush, right?
This is a very appealing argument – why take a risk when you don’t need to? We empathise with it. But, for investors with a long time horizon, it negates decades of investing wisdom.
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