Monday, May 18, 2009

Financial Planning - The Worse May Be Over

Tan Jian Yong

Money on the sidelines

Many investors tend to follow a peculiar habit of having most of their money in equities when markets are near top conditions, but having little exposure when markets are at their lows. With the S&P 500 having declined substantially in 2008, there was a huge amount of money waiting on the sidelines. As at 26 November 2008, the U.S. Money Market Fund was increased to US$3.7 trillion, which amounts to 35% of the total U.S. market capitalization. It have since reduced to about 30% today resulting in a sudden surge in worldwide indices and equity prices recently.

Take a second look at properties

On average, the prices of Singapore private properties have dropped by 14.1%. Investors interested in including properties as part of their portfolios may want to start shopping around, as the property market traditionally lags the stock market by six months to a year. The recent article in Sunday times about failing rental yield in Q1 is a true soothsayer about declining property prices trend for the remainder of 2009.

For those with limited funds or lesser knowledge, property funds offer a more liquid alternative with lesser capital required.

Commodities point the way

To legendary investor Jim Rogers, commodities are a good indicator of market improvements. Agricultural commodities are finding renewed interest among investors, and are attracting attention if only because the world requires agricultural produce to continue running. The fact that commodities are required for consumption points to their continued demand.

Slow and steady is the key

Templeton Asset Management's Dr Mark Mobius, Traxis Partners LLC's Barton Biggs and Fisher Investments Inc's Kenneth Fisher, who together oversee more than US$40 billion, concludes that traders are too bearish and the latest equity rally is the beginning of a new bull market. Barclays Wealth's Head of Global Investment Strategy also advises investors to start adding risk to portfolios.

In light of these developments, a good strategy to adopt now would be to increase your investments in a slow and gradual manner. To this end, we strongly advocate a regular savings program as the appropriate way to increase exposure in your portfolio.

Those who have stay true to their RSP will have witness some result in their portfolio after the April rally, For those who missed out on it, we also advised that it is never too late to take action. In the current economic climate, navigating the road to recovery can be tricky. Too much caution can cause you to lose out on sudden upswings, while too little can result in unendurable consequences. However, with proper planning strategy, staying in the market can prove to be profitable and we are here to guide you all the way.

Tan Jian Yong is the founder of Financial Planning Singapore, the leading financial planner in Singapore.

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