Stock market volatility is a measure of how much the stock market’s total value fluctuates up and down. Stock market volatility can increase when external factors such as inflation and the COVID-19 pandemic create uncertainty for the economy. This volatility contributes to investment portfolio gains and losses. Understanding market volatility should help you gain more often than you lose.

Inflation is a measurement of how fast the prices of goods and services rise. It is most often presented as the consumer price index or CPI. CPI is the aggregate change over twelve months in the weighted average prices of a shopping basket of goods and services representative of the typical consumer.

Very low or very high levels of inflation can be damaging to the economy, so most governments try to maintain a more balanced level of CPI at around 2%.

The most common asset classes held in a portfolio are equities (e.g. common stocks), fixed income (e.g. bonds) and to a lesser extent, alternative investments (specialty funds, mortgages etc.). A high-net-worth individual, foundation, corporation, institution or trust may employ the services of several managers, each of whom specializes in one of these three asset classes, to form an overall diversified investment portfolio. This article discusses the main differences between fixed income and equity investing and highlights a major difference between the two during inflationary periods.

Your investment manager has some overarching legal and ethical duties: to deal fairly, honestly and in good faith with you as their client, to use reasonable care to avoid misrepresentations and to always act in your best interests. But how can you be sure your investment manager is fulfilling these duties?

Your investment manager can best fulfil these duties and demonstrate them to you by putting in place a governance structure that is effective, flexible and visible to you.

An effective governance structure for investment managers, and ways in which you can stay informed and reassured about it, should include the following.

Robo-advisors were first introduced in 2010. It is predicted that robo-advisors will manage in excess of $US16 trillion by 2025. With such a large proportion of investments being directed mechanically, it is crucial to understand how robo-advisors work and what the disadvantages of robo-advisors may be.