ASSET ALLOCATION – A KEY TO PORTFOLIO PERFORMANCE

According to a study, over 90% of the impact to portfolio performance over time is due to asset allocation.

Many factors are important in helping you develop a strategy to meet your investment needs, including your investment timeframe, personal and career goals and your risk tolerance. One of the most important elements in the potential success of your investment plan is to utilize the power of diversification.

Allocating your portfolio appropriately among asset classes may help you achieve a comfortable balance between risk and return. Diversifying assets may make a portfolio less vulnerable to the dramatic performance swings that can occur when investing in a single security or asset class. A diversified portfolio may help you stick with your wealth plan for the long term.

Asset allocation can be achieved through a number of ways. One approach, which earned a Nobel Prize in Economics in 1990, is called Modern Portfoio Theory. A key to this theory is the “efficient frontier”. Developed through an extensive analysis of the risk and returns in the financial markets, the efficient frontier helps identify a desirable mix of equities and bonds. An efficient frontier can be found along the spectrum of asset classes, depending on your risk tolerance at any give point in your investing timeline.

HOW TO GRASP AN INVESTMENT OPPORTUNITY?

Strict adherence to investment discipline in the selection of long-term investments, investing in stages when prices dip, and portfolio diversification, may all be clichés, but they remain effective strategies. As mentioned above, markets always experience adjustments, but these do not undermine the long-term investment value of the market. Investors, therefore, may consider adopting some simple strategies. WealthStyles suggests that investors may invest whenever the market falls by a certain percentage as this may bring higher opportunities for better returns over a long-term period.

“Buy on Dips” examples

WealthStyles made reference to the performance of the Emerging European market index over the past decade (1996-2006) and set the strategy of investing whenever the index falls more than 5% in a single month. During this period there were twenty-five opportunities which met the investment strategy requirements, and for an investment period of one year, an investor could potentially gain an average return of 18.3%.

Buy on Every 5% price drop and hold for 1 year :

    Average return: 18,3%
   Maximum return: 112,3%
   Worst return: - 45,9%

Under the same investment strategy, if we extend the investment period to three years, then the investor could potentially gain an average return of 81.3%

Buy on Every 5% Price Drop and Hold for 3 years

    Average return: 81,3%
   Maximum return: 299,1%
Worst return: - 17,8%

Though the above results are highly positive, investors should be reminded that past performance figures are not indicative of future performance.

FROM FINANCIAL HEALTH TO WEALTH

Financial planning guides your way

From financial health to wealth

Financial tools can be used for different purposes in wealth management, with funds and insurance plans playing a central role. In general, funds provide wealth accumulation and growth, guaranteed funds offer asset preservation, while investment-linked insurance plans combine both utilization and transfer.

Comprehensive wealth management

Wealth management encompasses