The article “Invest in Equities Until You Reach Your Sleeping Point” from Morningstar advises investors on striking a balance between risk and reward in their portfolio. The central concept is that everyone should invest in equities to an extent they are comfortable with, without compromising their sleep due to market worries. The range for equity holdings, as suggested by Benjamin Graham, can vary from 25% to 75%, with the remainder invested in bonds​1​.

However, the ‘right’ level of equity investment is highly personal and dependent on one’s risk tolerance. Some people are comfortable being fully invested in equities, focusing only on the income generated, while others may prefer a safer portfolio composition with a significant portion in term deposits and property​1​.

Over time, equity markets generally deliver the best returns among all major asset classes, which makes them attractive for long-term goals. Despite the volatility and periodic negative returns, equities have shown resilience and consistently provided positive returns over any eight-year rolling average on record​1​.

Investors should be aware that equities can deliver negative returns about three years out of every ten, and a 50% loss might occur once every 25 years. Therefore, a 100% equity portfolio might be too volatile for most investors. A mix of 70% equities and 30% cash, for instance, would deliver 70% of the market volatility and still provide substantial returns​1​.

In conclusion, the article encourages investors to find their ‘sleeping point’ in investing—the level of risk and potential reward with which they are comfortable. This strategy ensures their health isn’t compromised by financial stress, allowing for growth in their investments.

Please note that the above summary may not cover all points in the article due to the constraints of summarising a complex topic and the time limit for exploring the content, however, understanding these factors is essential for anyone wanting a better investment experience and outcome. To get a better understanding of your investment’s and strategies that may be available please reach out to one of the Inspired Money team to book a time for an obligation-free chat.

This article was written by Director & Senior Adviser Shane Mitchell and provides general information that should not be considered personalised financial advice. If you have specific questions or concerns book a session to review your investment plan or any other financial planning issue contact Shane directly on 08 6222 7909 or book a meeting now via his booking page.



Written by

Inspired Money