KEEP CALM AND INVEST ON
The world is an uncertain place. We live in turbulent times. And we still have to manage our investments. Calmly.
The investment professionals at Yield Management Inc. have a diverse professional background and over a century of cumulative experience. As a team, they have seen it all, and their wealth of skill, knowledge and understanding is what sets them apart caring for their high net worth clients.
Risk management is one of the most important aspects of managing money. Working with a professional investment advisor is the best action you can take to protect and grow your assets. Most investment risks can be mitigated without expensive hedging techniques. Let’s look at a few aspects of risk management and how the professionals at Yield Management can help.
The first rule of risk management is diversification. You should be invested across a broad range of asset classes, markets, sectors and countries. Investing internationally is of growing importance, since it simultaneously reduces currency, geopolitical and market risk. People tend to react to the term “foreign investment” as implying greater risk, but it means nothing more than unfamiliar or distant. The Hang Seng is exotic to the Wall Street investor, the NASDAQ is exotique to the French investor and the CAC might even sound rude to some.
The flip side of the diversification coin is the risk of OVERDIVERSIFICATION. The marginal benefit of owning more than 12 individual equity holdings starts to drop sharply. In fact, excessive overdiversification will generate average returns at best, and incur additional fees, commissions and management expenses that will eat in to your returns. This is why most mutual funds under-perform the market. Working with a trusted investment advisor to hand-select a portfolio of well chosen, diversified stocks is the first step to managing your risk.
Under the mattress is not a safe haven. Neither is under a petticoat. There are four traditional safe havens: Gold, the U.S. Dollar, the Swiss Franc and the Japanese Yen.
When there is uncertainty or instability or any kind of chaos – real or perceived – assets flow to safe havens. Including a gold stock and having at least part of your portfolio in U.S. Dollar denominated investments are two examples of how you can automatically position yourself into the two most important safe havens. Talk to your Yield Management Advisor about safe-haven assets appropriate for you and your investment objectives.
RISKS OF STAYING IN CASH
It can be very tempting for a nervous investor to stay in cash. Don’t.
With interest rates so low, when you factor in inflation, you are actually losing money. Certain economically strong countries are even experiencing negative interest rates, meaning it costs you money to hold cash. Switzerland, Sweden and Japan have all experienced this phenomenon recently with Germany about to follow suit.
Even with positive interest rates, holding cash exposes you to INFLATION RISK. Inflation causes your purchasing power to decline. This means that year over year, you can buy less with what you have. The whole point of investing is to protect what you have and make it grow.
The best protection against inflation risk is to invest in the market. While the past is no guarantee of the future, a long term, diversified stock portfolio provides the best returns. Since 1950 the S&P 500 returned 7% annually, adjusted for inflation and dividends.
MARKET DOWNTURNS AND HAND-HOLDING
Markets correct, markets crash and at times they suffer slow, grinding downturns known as bear markets. These always pass. The important thing is to stay calm, and never sell into panic driven or volatile markets. This is one of the most important reasons to work with a seasoned professional, like the advisors at Yield Management. They have seen it all, and most importantly, they are objective. One of the most vital aspects of their job is not in fact investment selection, but keeping a cool head and guiding you through the inevitable ups and downs in the market.
THE NEXT STEP
Talk to one of the professionals at Yield Management to find out how they can help you to minimize risk and make your money grow. They can be reached at:
Yield Management Inc.
4th Floor, 14 Amba Deep Building,
Kasturba Gandhi Marg
New Delhi-110 001India
Phone: +91 11 4014 7039
Fax: +91 11 4046 8919