By Dennis Stattman, Dan Chamby and Aldo Roldan, Portfolio Managers of the BlackRock Global Allocation Fund
If there’s one thing we’ve learned as portfolio managers of a global, multi-asset mutual fund, it’s that flexibility never goes out of style.
Just consider all the markets have seen in the past five years, not to mention the last 30. No one could have predicted then that interest rates in the U.S. would go from 15% to 1.7%. But they did. And the stock market also hit new highs and notched record losses. We couldn’t imagine navigating that terrain without the unfettered ability to adapt.
It’s an advantage we believe has served investors in the BlackRock Global Allocation Fund well. After 25 years, we find ourselves reflecting on this and a few other lessons learned—lessons relevant to all investors:
1. Diversify, buy low, sell high, and have a plan
Call it a four-step program, call it obvious, but just do it. All markets and assets are not affected by the same factors in exactly the same way. So the more diversified your portfolio, the better equipped it is to weather a range of scenarios. And never overpay for an investment. Get in at the right price, and you have a better chance of getting out at the right price. Finally, do it all within the framework of a well-thought-out plan. Abiding by a plan can help you resist the temptation to about-face when volatility feels like too much to stomach.
2. Consider what to buy. And what to avoid
Investment success comes not only from what you invest in, but also what you avoid. We didn’t see the appeal of the “hot” dot-coms in the late 1990’s, and we avoided them. Not everyone understood or agreed at the time, but ultimately, it served our investors well.
3. Markets happy? Consider what could go wrong. Markets in despair? Consider what could go right
Oftentimes, a contrarian mindset allows you see opportunities before the broader markets acknowledge them. Our ultimate goal is to enter under-appreciated investments at attractive prices, then exit once sentiment has rewarded those assets. And it works the other way around. This same mentality has allowed us to avoid some “landmines” over the years (see lesson No. 2 above).
4. Surround yourself with smart people
When covering literally a world of opportunity, analysis is absolutely critical. But the data doesn’t necessarily tell the whole story—it’s the people looking at the numbers that make the difference. For us, this means building a team of investors (40+ today, up from three when we started in 1989) who both inspire and challenge one another’s assertions. For an individual investor, that might mean choosing high-conviction strategies with smart management teams that have a long-term record of success.
5. Take the long view
Two and half decades devoted to global investment has demonstrated to us that the best strategy is to choose a sound approach and stick with it—through good markets and bad. Avoid “short term-ism.” Instead, remain engaged as an investor for the long term to ensure you’re positioned to take advantage no matter how the markets turn. That principle has worked well for us for 25 years—and remains a key guidepost as we embark on the next 25.
This article was produced by BlackRock and was not written by the Quartz editorial staff.
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