Page 32 - Masala Lite Issue 155 November 2023

32 CASH COURSE WITH SHIVA

INVESTING DURING Asset Allocation is Your Friend
Investors have the highest degree of control over how their assets are allocated in
THE END OF THE WORLD their portfolio. Even before turmoil begins, if you have properly allocated assets
according to your risk profile, it becomes easier to ride. Better yet, you can even take
advantage of price declines.
Having some defensive assets may help investors sleep better at night. Gold prices
SHIVA SACHAPHIMUKH from tend to be stable and can be used to protect your portfolio from big drops in other
Farnam Tree gives his insight. assets during difficult times, as they tend to rise. Another good defensive asset is
real estate, though it matters more where it is located; and the cost of maintenance,
interest rates, and the price you paid, compared historically.
Moving or holding most of your portfolio in safe assets, such as money market funds,
may help if you are getting close to retirement and need to start to withdraw to cover
living expenses. Planning this ahead of time helps to negate short term gyrations
of asset prices.

Beware of Speculative Investments
Speculative investments are a double-edged sword. In rising markets, these assets
can produce very high returns. They are also the ones that have the largest falls
during periods of stress.
If the fundamentals of the assets are strong, prices may eventually recover. Most
At present, the global environment is one filled with fear and uncertainty. Geopolitical
investors do not have the wherewithal to hold through painful drawdowns, and more
conflicts have surfaced, and the macroeconomic environment has led to volatility
so when the rationale behind buying is based on excitement or optimism.
in financial markets. The price of U.S. treasury bonds has fallen by 60 percent from
its high. Closer to home, the Thai baht has depreciated by 10 percent against the US Investors need to be cautious investing in such assets all the time, but even more
dollar since the end of January. so during periods of high turmoil. Even when optimism is at a high, it pays to
As dire as current circumstances may be, investing over a long-time horizon necessitates remember that financial markets always experience periods with large asset price
contending with such periods. declines. Trying to predict when or how this happens is too difficult an exercise, and
investing in speculative assets can be like playing with fire. Investors are best served
Turbulent events are difficult to predict by nature. Instead of trying to forecast the by remembering that consistency beats out intensity.
future, we believe that you are better served by focusing on variables under your
control. Here are some items to keep in mind that can serve you well in times of distress.
Do Not Time the Market
SHIVA SACHAPHIMUKH is a Director and part of the HP_Kishnani_Family_01.jpg
Investors are often tempted to sell when asset prices fall fast, and invest again later
investment team at Farnam Tree. He is a licensed
when the outlook is better. This is one of the biggest investing sins.
Investment Consultant with the Thai Securities and
By trying to wait for the ‘better’ time to invest again, you will most likely miss the Exchange Commission (SEC).
rebound when prices rise. Investors have lost more money preparing for corrections
than from the corrections themselves. Farnam Tree is a boutique investment and wealth
management firm based in Bangkok. The company
Consider the following as evidence: if you invested USD 1 in the S&P 500 from is a licensed Investment Advisor under the Thai SEC
1990–2018, and missed the 25 best days, it would have grown to ~USD 5. If you just and Ministry of Finance. JAPANESE WAGYU OGUMA
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