In early April, President Donald Trump’s ‘Liberation Day’ rocked financial markets.
Global stocks markets plunged as US tariffs triggered sharp sell-offs, wiping out over $5trn over just two days.
Markets then rebounded swiftly once tariff pauses were announced and have continued to rise – in fact all major markets ended June higher than they were on 2 April, showing how quickly sentiment can flip.
As we now get closer to the end of the 90-day pause, we could well see more volatility.
But how can investors prepare their portfolios and is it better to be investing in passive or active funds right now?
This article isn’t personal advice. Remember, investments rise and fall in value, so you could get back less than you invest. If you’re not sure if an investment’s right for you, ask for financial advice.
Stay the course, avoid the noise
Volatility isn’t new but it’s generally uncomfortable. With targeted headlines, it’s easy to get distracted and forget that long-term investing tends to reward those who stay the course.
Regular contributions, disciplined reviews and trusting a well-built process are essential to remove the emotional bias that can influence our decision making. Market events will always unfold, but what’s key is to stay focused on the goal.
When it comes to building a portfolio to weather market storms and help you invest for long-term success, we think a core-satellite approach is an option for most investors.
The core usually forms the bulk of the portfolio, and is complemented by smaller 'satellite' investments, possibly in higher-risk areas.
The idea is to help you achieve greater returns with a relatively-lower level of risk, thanks to diversification.
Holding a well-thought-out portfolio that invests in lots of different countries, industries and types of investment should reduce the impact of any one area performing poorly.
However, this isn’t about choosing sides between active or passive. It’s about how you use both styles to build a better portfolio.
How to build a strong core investment portfolio
A strong core investment portfolio should be globally diversified through disciplined asset allocation and built to last.
This can be done actively or passively.
Typically, the shares part of your portfolio will provide long-term growth, while the bond exposure can provide some stability and some shelter from market falls.
The structure should reflect your long-term objectives and how much risk you’re happy taking.
Your core shouldn’t be the place for speculation or under the influence of short-term noise. It’s the foundation upon which everything else is built.
Done well, it should require few changes with structured reviews and offer compounding benefits over time.
Looking for core ideas?
June marked the one-year anniversary of our multi-index volatility controlled portfolios which were built to deliver steady outcomes across four different risk profiles over the long term.
The HL Multi-Index funds were constructed using index components while rebalancing makes sure they remain true to their risk profile.
Their design can help investors remain focused on the outcomes and not the headlines, or perhaps build a foundation for your next steps.
Passive funds tend to move with the market, so it’s important for investors to understand both your allocations and objectives over the long term to make sure they’re aligned with your investment goals.
Building beyond the core – adding your satellites
A well-diversified core can do much of the heavy lifting in a portfolio, while giving investors, seeking targeted exposures, the flexibility to do so.
It’s a great way to learn and also improve on returns, or make tweaks on how much risk you’re taking.
Satellites can be actively or passively managed funds, ETFs or even individual stocks that target sectors, regions or themes.
In essence, this allows investors to personalise portfolios without undermining their long-term strategy.
The quiet power of asset allocation
However, the debate between active and passive often overlooks the more important question.
How are assets allocated?
For long-term investors, academics and industry professionals tend to agree that asset allocation is the primary driver of returns in a diversified portfolio, not market timing.
Asset allocation allows investors to spread risk across geographies, sectors and asset classes. Markets rotate, and this year has illustrated that yesterday’s winners aren’t always today’s leaders.
In 2024, the US led global stock markets, mainly thanks to tech and AI optimism.
In 2025 though, geopolitical shifts, triggered by leadership changes, have offset that.
We’ve seen sharp shifts in favour of European stocks for the first half of the year while the US, a previously dominant market, has been more muted.
This shift underscores the value of global diversification and a structured asset allocation approach.
But it also highlights the potential of making tactical tweaks and additions using your satellites.
Looking for satellite ideas?
From the UK and US to Europe and emerging markets, the HL Building Block funds are professionally managed and designed to give you easy access to specific markets or asset classes, using carefully selected expert portfolio managers.
They can help you complement a diversified core and fine-tune your investments with targeted exposure, keeping your total portfolio flexible, balanced and aligned with your goals.
These funds are managed by Hargreaves Lansdown Fund Managers Ltd, part of the Hargreaves Lansdown Group.