Market behaviour can be extremely erratic which can create a huge amount of uncertainty when predicting the future. In this insight, Lewis Grant, Global Equities Senior Portfolio Manager at Hermes Investment Management, explains why he therefore favours a consistent, boring approach over one that is fuelled by sentiment and hype.
Excitement in investment is rarely a good thing. It can create hype which in turn can lead to irrational behaviour. If we take Bitcoin as an example, hype around investment in the cryptocurrency drove the asset class to grow at a phenomenal rate and for a while, this sentiment-led growth may have left investors feeling excited about potential returns. Price momentum can act as an incredibly effective investment signal but it can also be a dangerous one. We believe it is important to remain emotionally unbiased as euphoria should not be the goal of investing.
That is not to say such hyper-growth investments need to be avoided altogether, but instead understood in a risk controlled portfolio and as part of a disciplined, diversified approach.