A tough quarter for investment portfolios

New figures from Asset Risk Consultants (ARC) show that investors experienced a tough three months in the third quarter of 2011.

The figures suggest that wealth managers had one of their worst quarters since the report was first constructed in December 2003, as a result of market reactions to the eurozone debt crisis.

ARC looked at the performance of 38 wealth managers across four different investment strategies; ARC Sterling Cautious, ARC Sterling Balanced Asset, ARC Sterling Steady Growth and ARC Sterling Equity Risk.

ARC Sterling Cautious lost an average of 3.7% during the third quarter. ARC Sterling Balanced Asset lost an average of 6.8% and ARC Sterling Steady Growth lost an average of 8.9%.

ARC Sterling Equity Risk lost an average of 11.8% over the quarter.

Here at Informed Choice, our own model portfolios fared much better during the third quarter.

Our Cautious Model Portfolio returned -2.04% over three months and +0.70% over the year. Our Moderate Model Portfolio delivered -4.55% during the third quarter and -1.43% over the year.

Our Aggressive Model Portfolio, which sits between ARC Sterling Steady Growth and ARC Sterling Equity Risk in terms of risk profile, returned -9.15% over three months and -4.55% over twelve months.

Whilst it is always pleasing to outperform our peers over any period of time, often with less risk as measured by volatility, performance is only one aspect of a successful investment portfolio.

These figures are an important reminder that the value of investments can go down as well as up. World events and market reactions are some of the biggest drivers of investment returns, particularly in the short term.

When investment markets are falling in value, investment portfolios will fall in value. The extent to which portfolios lose value will depend largely on their exposure to each asset class – cash, fixed interest securities, equities and property.