Financial Markets, like history, tend to repeat themselves, advisers will mention the cyclical nature of them and it’s prudent to do so.
What advisers also refer to are Bull and Bear markets but I’m inclined to add Hippo as a new classification. One that waddles from side to side without seemingly either making or losing ground.
The cautionary note here is that markets tend not to crash in an upwards direction and whilst I’m not predicting a crash I am recommending you review your risk exposure and ensure a corresponding asset allocation. We MOT our cars each year but often neglect to assess our investment approach regularly.
There are many measures of investment risk, one of the most commonly used is volatility but all too often advisers focus far too much on possible losses than gains. No bad thing in principle to be cautious but it’s not an objective approach.
A balanced approach would be to consider the potential upside and downside of any potential investment. I would argue that this is way more than simply asking someone to score their attitude to risk on a scale of one to ten and showing out a typical bond/equity type portfolio. It should be more personal, appropriate to you in definition and understanding. Behavioural Finance accomplishes this most appropriately.
As a starting point it allows me to show out to existing and prospective clients exactly what a Balanced or Cautious investment looks like, how it has performed and what it is likely to achieve or be susceptible to. Over the course of your investment experience there should be no surprises when it comes to your returns or otherwise.
I often say to clients that it is time spent in the market and not timing the market that delivers more for you. There are other considerations and having cost effective, monitored and rebalanced funds contribute substantially. Of greatest importance is having investments which meet your own objectives.