Investors all the same cowering inwards fearfulness from their 2008 losses mightiness convey missed the stock marketplace rally inwards 2013. Many chose to sit down on the sidelines, together with others are worried near a looming stock marketplace bubble.
Cash holdings on the UBS Investor Watch Survey were at 22%. And globally, UBS clients agree 30% of their assets inwards cash or cash equivalents.
But this isn't the best thought because involvement payments on cash deposits don't transcend the prevailing inflation rate.
So what should an investor do?
Here's what UBS is telling it's wealthiest clients to do. UBS' Private Wealth Investment Management sectionalization manages coin for those alongside a minimum cyberspace worth of $25 million.
Stocks
For those worried near a stock marketplace bubble UBS' Andrea Fisher writes that "there is virtually no testify that stocks convey disconnected from fundamentals." She argues that until pretty recently, the S&P 500 was genuinely lagging the recovery inwards earnings. While she is "optimistic [on] the upward march inwards USA equities" she thinks investors postulate to laid for to a greater extent than volatility. Some of the best opportunities prevarication inwards sectors tied to U.S. economical growth.
Bonds
Investors postulate to laid for "several years of unusually depression bond returns," Brian Nick, a senior portfolio strategist at UBS argues. Investors tin lower bond jeopardy yesteryear doing i of iii things. 1. Lower the duration of the bond portfolio 2. Hold lower character bonds 3. Try hedge fund strategies because they "traditionally present depression or fifty-fifty negative correlation to bond prices."
"Most hedge fund strategies cannot fit bonds’ income or downside protection," Nick writes. "But nosotros believe they volition generate meliorate returns over the foreseeable hereafter piece adding niggling to portfolio volatility. This makes them a valuable complement to bond portfolios."
Gold
Investors alongside large aureate holdings (2-3% of their portfolio) should cut back their exposure inwards 2014, writes UBS' Andrea Fisher.
"Gold tends to practise good when existent involvement rates are either falling or negative every bit good every bit when panic pervades the market. Over the yesteryear year, existent involvement rates convey begun to increase. This development, along alongside softer need from emerging markets, lower fundamental banking corporation purchases, together with Fed policy tightening dialogue, assist explicate the sudden 21% year-over-year driblet inwards global aureate need inwards 3Q13. Diminished investor appetite for aureate inwards 2014 could effect inwards an additional 300-500 tons (i.e. 7%-11% of yearly demand) of out- flows hitting the market. To residue render together with demand, aureate could autumn farther to its marginal production cost of USD 1,050/oz-1,150/oz; an additional 12% loss from electrical flow levels."
Broader strategies
To become to a greater extent than from your portfolio this year, UBS' Michael Crook, caput of portfolio together with planning research, thinks investors should consider doing iii things, that emerge from 2013 Nobel Prize winning question of Robert Shiller together with Eugene Fama.
1. Change your liquidity preference (buy illiquid securities). These illiquid assets every bit good assist investors avoid marketplace timing risk.
2. Change your fourth dimension horizon.
3. Invest alongside managers that convey an border through meliorate marketplace knowledge.
Active management
Nick every bit good suggests that investors reconsider active administration every bit the tendency of portfolio managers beingness bested yesteryear the S&P 500 is initiatory of all to reverse. "Regardless of the environment, nosotros believe virtually all investors should invest using a balanced approach betwixt active together with passive management," writes Nick. "We notice that higher-tracking mistake managers convey greater potential to add together value to portfolios, which makes them peculiarly useful for ful- filling property classes on which nosotros are neutral or underweight."
2014 is probable to hold upwardly a challenging twelvemonth for investors alongside higher stock marketplace valuations together with bond yields that are all the same low, but UBS thinks these strategies should help.