Jonathan Ramsay

ETFs can sometimes be blunt investing instruments, in particular when it comes to global markets.

This week our ETF detective looks at the Vanguard All-World ex-US Shares Index fund, as used in the InvestSMART Diversified Portfolios, and asks how it can be combined with a US-focused fund.

Two esoteric sounding but important issues are emerging in the finance industry. How do these affect you?

Thinking about the worse case might help you steer a straighter course through market storms.

Blip, definitely. The following charts shows the estimated performance of the InvestSMART diversified portfolios.

Let's face it no-one really knows what is going to happen during the rest of 2016 but we can say something more sensible about what might happen if the news turns out to be bad - a rerun of 2008 seems unlikely.

InvestSMART has recently reviewed their Diversified Portfolios and projected returns for the different asset classes. The take-away? Our portfolios remain well diversified and we have decided not to change any weightings across the various asset classes. Australian equities, are currently a little bit kinky or volatile, but at these prices, should provide a decent long term returns with a few meaningful bumps along the way. Bond investors shouldn't expect too much.

Recent volatility has sent fear into some investors' hearts, but the outlook for long-term returns is not all that bad. Remain calm, be cautious.

1. Despite all the bad news, diversification helpedInvestors were riding high in the first half of the year and it looked like we were heading for a bumper year, then it all got a bit trickier. Interestingly, markets shrugged off worries over the break-up of the European Union but the prospect of slowing Chinese economy really changed the landscape, especially in Australia. In the end, some asset classes still produced double digit returns.

You may have heard about the US Federal Reserve recently raising rates and we wrote about the surprising extent to which it will affect investors in Australian Government bonds. In truth no-one really knows what the Fed will do next and there will most likely be some miss-steps and uncertainty along the way. That means volatility - short term losses as well as gains.

Why is it that when China, Brazil, or the US Federal Reserve sneezes, our local stock market gets 'man-flu'?

'tis the season to be jolly and, for people like us, it's time to make ridiculous assertions about where we think markets will be in a year's time.