Looming Investment Concerns

Investment advisors are increasingly focused on managing risk and bracing for a market correction, according to Fidelity Investments.

The results of the second quarter Fidelity Advisor Investment Pulse survey revealed that advisors considered market volatility the top concern to navigate. In the first quarter of 2014, volatility was the third most important concern, behind managing portfolios and fixed income.

The challenge provided by market volatility was ensuring clients continue to benefit from the bull market, while also protecting against the downside and possible market correction. Fidelity’s Investment Pulse was an open-ended survey of more than 200 advisors.

“Based on our Q2 survey results, we know that many advisors are thinking about a possible market correction, but at the same time they are looking for ways to find growth and generate income for their clients,” Scott E. Couto, president of Fidelity Financial Advisor Solutions, said in a statement. “We believe that the differences between winners and losers among asset classes and individual securities are likely to increase, favoring active asset managers with the ability to conduct the research necessary to identify those opportunities offering the best chances for growth.”

Advisors are wondering if the bull market has run its course, yet, and debating when it is time to get out. The second-most important concern was portfolio management and investment allocation, with advisors citing the importance of staying diversified, finding the right sector to invest in, and finding undervalued securities with room to grow.

While the top concern for the first quarter had been fixed income, this issue is now down at 4, behind concerns over rising interest rates. Finally, the fifth most important issue for advisors is safely generating yield for clients without taking on undue risk.

“Our investment and research teams see signs pointing to continued growth in equities, for example, in value stocks and certain segments of the economy, including the technology sector and the health care sector,” Couto said. “We’ve seen many advisors take advantage of sector investing to diversify their clients’ portfolios, manage risk, and help generate potential alpha [a measure of performance eon a risk-adjusted basis].”