The S&P/ASX 200 Index (ASX: XJO) is struggling today.
After posting losses of 1% earlier in the morning, the ASX 200 is currently down 0.29%.
That leaves the index down around 5% in 2022, in what's shaping up to be a volatile year for global share markets.
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Investing is getting harder
That volatility hasn't been lost on Vimal Gor, head of alternative duration strategies at Pendal Group.
Gor, quoted by the Australian Financial Review, says that he's been investing for almost 30 years. And "it gets harder every year".
While bond markets have been difficult for some time, Gor said that equities' golden run looks to be changing. "This month, the pressure was too much to bear, and higher interest rate moves finally knocked equity markets off their record highs."
He attributes the increased volatility on the ASX 200 and global indexes to the rise of computer algorithms on the trading floor, alongside a higher percentage of retail investors dominating markets and a marked increase in passive investing.
The only free lunch in investing
So what's an ASX 200 investor to do?
Gor said, "The answer, as always, lies in the only free lunch in investing: diversification. The more asset classes you hold, the better your outcome."
He points to 2 emerging "key megatrends" investors should consider homing in on. Namely digitisation and decarbonisation.
Why decarbonisation?
According to Gor (quoted by the AFR):
The interest in and price of carbon have exploded. For example, CBL Markets' GEO – the world's first voluntary carbon offset benchmark contract – has rallied more than 900% over the past year. Although investing in carbon as an asset isn't easy to do, it is well worth the time and effort.
Then there's the digitisation megatrend.
Chief among that trend are cryptocurrencies and the blockchain technology that supports them.
"Yes, there is a lot of hype and risk around the crypto markets," Gor said. "But filtering the universe is relatively straightforward and means you can invest in the coins, blockchains and protocols that are adding real value.
"Holding a diversified exposure to the largest digital assets means you can participate in the 'digitisation of everything' as a megatrend."
He noted that the digitisation trend is backed by central banks and governments, with some launching digital wallets and others looking into their own central bank digital currencies (CBDCs).
Looking ahead, Gor summed it up saying, "As some asset classes die or reprice, new ones arrive to help you diversify and manage your portfolio."
How has the ASX 200 been tracking?
ASX 200 investors likely did well last year, with the benchmark index gaining 13.0% in 2021.
Things have been tougher this year, bringing the 12 month gains for the ASX 200 down to 3.8%.
