WrapManager's Wealth Management Blog
When life changes, we can help you thoughtfully respond.

Will China's Market Volatility Affect Your Investment Portfolio?

Posted by Michael J. O'Connor | CWS®, Vice President Investments
August 12, 2015

Chinas_Stock_Market_Volatility_Affect_Investment_PortfolioChina’s stock market was down over a third from mid-June to mid-July, wiping out almost $4 trillion in value. The market had risen some 150% over a year ending in June1—so it’s actually still up from where it started in January2—but nevertheless it has made for quite a media spectacle.

With much of the attention shifted to China’s pronounced declines, it makes sense that many investors are concerned such stock market volatility coming from the world’s second largest economy could spread globally, triggering a conflagration of losses across world stock markets.

2 Steps to Take Now in Response to China’s Erratic Market Behavior

It is possible that your portfolio needs some tinkering to position for the possibility of future volatility ahead. Here are two steps we suggest you take today:
  1. Check Your Investment Portfolio’s Exposure to China – Your financial advisor or one of our Wealth Managers can help you screen your portfolio to check your China equity allocation. If you discover that you’re too heavily allocated to China relative to your risk tolerance and investment objectives, perhaps you and your investment advisor can work to adjust your exposure. 
  2. Broadly Diversify Your Portfolio – diversification is the age-old investment tool that is meant to help investors potentially mitigate risk while allowing for the possibility of growth. Building a broadly diversified portfolio could help mitigate losses that could occur due to volatility.

International Diversification Should Help, But Proceed with Caution

China’s government has stepped up efforts to prevent a further rout, which as Bloomberg reports includes “preventing the sale of shares of certain companies.”3 These efforts may help, but there are no assurances and investors should consult financial advisors with regards to China exposure, both now and moving forward. Some high profile investors, like Bill Ackman of Pershing Square Capital Management, believe that China’s economy and stock market still lack transparency with unreliable statistics. At any rate, the Chinese economy and stock market are two factors investors should continue to watch closely.

Have a Wealth Manager Check Your Portfolio’s Allocation Today

At WrapManager, we believe proper portfolio diversification means not only diversifying across asset classes, styles, and regions, but also across money managers. Having your entire nest egg invested with only one manager often means potentially pigeon-holing yourself to that manager’s methodology and performance, for better or worse. And it can also mean being invested too heavily in one particular style or asset class. One of our Wealth Managers can analyze your portfolio to show you how well your assets are diversified. To have one of our Wealth Managers help you today, call us at 1-800-541-7774 or start a conversation here.


Portfolio Diversification