Lessons learnt

CFAS expert and chief executive of UTI International Praveen Jagwani said the year has been marked by unexpected events globally, like Brexit and the Trump victory. Domestically, the SGD-USD has been somewhat volatile as Singapore's growth continues
CFAS expert and chief executive of UTI International Praveen Jagwani said the year has been marked by unexpected events globally, like Brexit and the Trump victory. Domestically, the SGD-USD has been somewhat volatile as Singapore's growth continues to be sluggish," said Mr CFAS expert and chief executive of UTI International.PHOTO: REUTERS

The CFAS panel of experts says it has been "a difficult year", given that one of the objectives is to maintain purchasing power in Singdollar terms.

"The year has been marked by unexpected events globally, like Brexit and the Trump victory. Domestically, the SGD-USD has been somewhat volatile as Singapore's growth continues to be sluggish," said Mr Praveen Jagwani, CFAS expert and chief executive of UTI International.

Here are the main lessons from the Portfolio Series this year:

1.  DIVERSIFY ACROSS ASSET CLASSES, GEOGRAPHIES AND CURRENCIES

The sheer amount of global money chasing yield and opportunity makes it challenging to observe trends and correlations.

STARS TAKE TURNS TO SHINE

We saw that in different months, different asset classes outperformed their benchmark. Thus in no month did all asset classes underperform.

'' CFAS PANEL

So making tactical allocations to mispriced assets was difficult and the panel followed a core strategic model of optimal diversification.

"We saw that in different months, different asset classes outperformed their benchmark. Thus in no month did all asset classes underperform," said the CFAS panel.


2.  DON'T CHASE MOMENTUM

Short-term news flow can cause some securities to rally or crash suddenly and attempting to catch the bottom or the top is virtually impossible for pragmatic investors.

Mr Jagwani said: "The DBS stock has been a classic example of going from a negative outlier to a super performer with changes in market sentiment. Thus, it is best to stay invested in well-researched, high-conviction stocks."


3. BE CAUTIOUS DURING EXTREME EVENTS

The panel had thought that the risk of markets selling off was significant in the wake of the Trump victory. Thus it was driven by caution to raise some cash in all portfolios to minimise risk.

Raising cash signals two things: keeping the powder dry to quickly take advantage of opportunities after the US election, and a defensive positioning of the portfolio in view of asset volatility. However, despite the pre-election narrative, the markets rebounded quickly after the election and surprised the CFAS panel.

"In hindsight, the panel should have gotten back to the market much faster," said the panel.


4.  MODERATE RETURN EXPECTATIONS

Investors have been in a low-growth, low-interest rate environment globally since the financial crisis of 2008.

In such a scenario, it would be wise for investors to realise that the expected returns to be achieved with reasonable risk would be lower than before.

Thus a change in mindset would be beneficial and induce less anxiety about investing.

Lorna Tan

A version of this article appeared in the print edition of The Sunday Times on December 11, 2016, with the headline 'Lessons learnt'. Print Edition | Subscribe