Importance of diversified portfolio
Dec 2014 saw the drastic fall of KLCI due to fall in oil and gas prices, from USD70 to USD50~USD60. Malaysia also suffered falling currency exchange rate against USD. Being a oil producer and exporter, the fall means companies' profit are getting thinner. Worry is there Petronas might cut capex and in turns affects companies that rely on Petronas' projects. Stock price of oil and gas companies fall.
We also see our clients' investment shrink in value, by as much as 20%. Then we realized most of our money are kept in Malaysia, that is quoted in MYR currency. For clients who has invested in Singapore funds and stocks, their value was relatively better as we see the appreciation of SGD against MYR.
Aha, doesn't we study portfolio construction through asset allocation in CFP? Aren't we supposed to advise clients to properly allocate their money in different asset class, different geographical location for risk management?
How important it is to have a diversified portfolio and regular re-balancing. As different asset class and different countries will perform differently at different time, it will help clients to avoid losses due to poor diversification.When clients' portfolio grows, it is equally important to do re-balancing.
No comments:
Post a Comment