Since people have different financial situations and attitudes towards risks, there is no single investment strategy or product that’s perfect for everyone.
To make an informed decision, it is vital that you take a hard look at your own personal circumstances, goals and time frames, as well as the options available to you. There are countless instruments to invest in and the list ranges from cash and near cash products, such as term deposit accounts, to more volatile instruments like individual stocks and shares.
Wherever you decide to put your capital, bear in mind that any solid investment portfolio should be well diversified across a lot of different asset classes, says Richard Musty of Lloyds TSB Middle East. “But customers should only invest in the products they are comfortable with.”
Shailesh Dash of Al Masah Capital says an ideal portfolio should consist of 10 percent cash, 25 percent fixed income, 25 percent equities, 25 percent currencies and commodities and 15 percent in real estate or other investments. However, given the difficult market conditions, the recommended ratio will be 35 percent cash, 35 percent fixed income, 15 percent equity and 15 percent commodities, currencies and real estate.
For Clem Chambers of ADVFN.com, the top three picks for a novice investor would be cash, gold and exchange-traded funds (ETFs).
“Cash is always good to have on hand. You should always hold some gold, its future looks assured for a few more years yet and it’s fun to own. Market ETFs are stocks that mirror the whole market. When you want to invest in the stock market but are not ready to pick particular stocks, these are a cost effective way of doing it.”
For those who are new to investing, whether they are conservative, aggressive or a little bit of both, Dan Dowding of Killik & Co Middle East suggests the following features that investors may seek in funds:
For the conservative
The conservative investor should aim to achieve growth in capital and income in real terms over the longer term. The fund should invest substantially in equities and fixed interest securities, but may also invest in collective investment schemes and money market instruments. It should pursue an active asset allocation strategy, investing in equities, bonds, preference shares and commodities.
For the conservative-aggressive
If you are somewhere between conservative and aggressive, seek a fund that provides a high and growing level of income and aims to preserve capital in real terms over the longer term.
Such a fund will generally be invested in focused equity positions, identified through a bottom-up, stock picking approach, within a global macro economic framework. The fund should aim to have a prospective yield that is 15 percent greater than the prevailing Index yield over a rolling five-year period.
The investment philosophy should be based on achieving real returns over medium term time frames. Preservation and growth of capital are considered more important than “benchmark risk” and accordingly the portfolio should be constructed with little regard to equity indices. To achieve these aims, the managers must employ a global thematic and investment approach with the ability to hold cash up to 25 percent if insufficient opportunities are identified.
For the aggressive
For the aggressive investor whose aim is to generate capital growth, effort should be directed at seeking investment predominantly, for example, in Russian or Greater Russian securities or securities issued by companies transacting a significant proportion of their business in Russia and Greater Russia. A fund for the aggressive investor should ideally employ a global sector approach to determine the best investment opportunities.