The Star: The Need to Realign Investment Portfolios

A recent survey by Lombard Odier shows that in the past two years, Asia-Pacific high net worth investors have been opting for conservative approaches and rebalancing their portfolios. Placing your money in different asset classes spreads out your risks and hopefully generates better returns. Realigning your portfolio should be done in line with the risks and volatility. 

Kimberly explains that portfolio diversification helps to ensure the portfolio does not get wiped out by a single asset class and that it is important to always stay diversified. However, Kimberly also cautions against over-diversification and further elaborates on factors to consider when diversifying. These include your liquidity needs, financial goals, time horizon, risk appetite and cash flow management which includes your income and expenses. If you plan to use your money within a year from your time of investment, Kimberly advises to avoid investing in non-liquid assets such as property or real estate. The cost of high liquidity and safe assets would be lower returns and vice versa, therefore having a balance of different asset classes is vital. 

According to Kimberly, the general rule of thumb is to diversify into five asset classes. Investors can start with two or three and gradually increase to five. Kimberly recommends starting with equity-based and fixed-income and advises against starting with alternative investments. It is recommended to look for asset classes that are not too volatile and companies that can withstand economic uncertainties.

This article can be found online here.