Monday 16 July 2012

Asset Allocation - Points to Ponder by Meyer International Bangkok Thailand

According to Richard Cayne, one of the most significant decision for an investor is how to choose an asset allocation model for his/her portfolio. Asset allocation plays a major role in determining the investment performance of an investor. Following a proper asset allocation plan can result in successful returns while following a poor plan or deviating from the plan can result in investor’s underperformance and overall, poor returns.   

Asset allocation is a diversification strategy and investors need to decide wisely upon how to position his/her portfolio as per the given options. Considering the plethora of choices available for the investor, creating an asset allocation portfolio looks very complicated and confusing. However, it is very important to choose appropriately when deciding which assets to hold, says Richard Cayne Meyer International Bangkok Thailand.

Risk is the first point that should be considered extensively by any investor when deciding upon asset allocation. The investor should be well aware of how much risk can he handle. As per Meyer Asset Management Ltd`s Bangkok based servicing arm Meyer International Ltd, every investor should always remember that the market is capricious and therefore he should be ready to face volatility. While an investor can expect stability when investing in fixed income investments it is also a clear fact that these fixed income investments have lower returns. So assessing your tolerance for risk is very essential before you allocate your assets and invest. Once you have identified your risk tolerance levels, it is time to look into equities, mutuals, hedge funds, fixed income, alternative investments, and bonds. During this stage, you need to find an appropriate balance and mix between return and volatility.  A discerning and smart investor chooses the right investment mix as per his own needs and risk tolerance.

According to Richard Cayne Meyer International in Bangkok, the investors often get confused as to which investments and asset classes to consider during asset allocation. However, the answers to this question vary widely as not all investors share the sale risk tolerance levels.   Indeed someone looking at a product with a 20% per annum target return on their portfolio would have a very different risk tolerance to an investor looking for a 5-7% target return.  Richard who worked in Tokyo Japan for over 15 years can certainly attest to the understanding of risk tolerance levels as being extremely important when managing client expectations.  While Japanese based clients for instance would all like double digit returns few have the to stomach to accept the volatility that comes along with such return.  Japanese clients in general would like bank account like volatility with higher than the near zero return banks offer these days.

It is also worthwhile to mention that age is an important factor to be considered while deciding upon asset allocation. Every investor needs to revise his asset allocation as when his age or objectives change. Consider age a factor at an early stage while planning for asset allocation. In basic, young investors have enough time and they can plan investments that result in long-term profitable returns. On the other hand, those who are elderly perhaps in retirement  should choose options, which provide less volatile returns of a more fixed income nature.  

Indeed, there are some other points too that need to be considered while deciding asset allocation for your portfolio but understanding your own risk tolerance will help you make a good start with your asset allocation.

Richard Cayne of the Meyer Group currently lives in Bangkok Thailand and consults individuals and corporations alike on offshore funds and offshore structuring.  Meyer international Ltd is based in Bangkok Thailand and is the servicing arm to Meyer Asset Management Ltd which is a wholly owned entity of Asia Wealth Group Holdings Ltd which is listed on the PLUS stock market in London UK.

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