With inflation on the rise, investors are looking for ways to protect their portfolios from market volatility and rising prices. One strategy that has been gaining in popularity is active asset management—but what does it mean? Stephen Bird, CEO of Abrdn, a financial technology firm that focuses on helping its customers build resilient investment portfolios, highlights why.

What is Active Asset Management?

At its core, active asset management is a form of risk mitigation that ensures that an investor’s portfolio remains balanced and optimized for long-term returns. It involves actively monitoring the performance of each asset in a portfolio and making adjustments as needed to ensure those assets remain profitable despite market fluctuations. “The goal is to identify potential opportunities while also minimizing losses by proactively managing risk,” says Bird.

Why Is Active Asset Management Important During Inflationary Times?

Inflation can have a significant impact on an investor’s portfolio, and not always in a good way. As prices increase, an investor’s purchasing power decreases, and their investments may not generate the same returns they did when inflation was low or even non-existent. That’s where active asset management comes into play. By regularly monitoring your investments and adjusting them as needed, you can minimize losses due to market volatility and make sure your portfolio remains optimized for long-term gains despite inflationary pressures.

What Are Some Tips for Managing Assets Effectively?

Bird suggests taking a holistic view of your investments at all times: “Look at the big picture to understand how each component fits into the overall strategy you have established for yourself or your organization.” He also recommends being proactive about research and identifying potential risks before they become problems. Finally, Bird emphasizes the importance of diversification; if you spread out your investments across different types of assets, such as stocks, bonds, mutual funds, real estate, commodities, etc., your portfolio will be better able to withstand periods of increased volatility due to inflationary pressures.

Active asset management can be an invaluable tool during times when inflation is on the rise. By following some simple tips, such as staying informed about current trends in the markets and diversifying your holdings across different types of assets, you can make sure your investments remain profitable regardless of economic conditions. Source: Bloomberg.com