Grow your wealth with disciplined, diversified plan

The ongoing sluggish market conditions in the global markets and that of the GCC markets, in particular, has prompted many investors to question their investment strategy and risk tolerance. It has also forced many to consider a temporary postponement of their investments. In times of uncertainty, people become more conservative and many choose to wait for the upturn.

However, like all good wealth managers, I always remind investors of the fact, that in a bear or sluggish market, the best investors behave consistently and don't allow strategy to be dictated by market changes. If you have a strong portfolio, that has true diversification and a level of risk you're comfortable with, its value will steadily grow.

There are always risks. Thus, it pays to adopt an investment strategy that provides some level of protection while also generating the returns you need to accomplish your financial goals. The bottom line is 70-90 per cent of long-term returns are the result of asset allocation, not securities selection. Therefore, where you invest, ie in which asset classes, is more important than the individual investments you make. Over the past three decades, each time there was a downturn, the growth in subsequent years has been good. Well-diversified investors have nothing to fear as long as their strategy is consistent, as a broadly diverse portfolio has a protective effect.

Putting this all together, the mandate for investors can be summed up in just one word – diversify. By diversify, I mean you should invest across a spectrum of markets: Indian stocks/funds, global stocks/funds, GCC markets/funds, debt instruments, real estate, and natural resources (like oil and gas, gold), and possibly even currencies. Why? Over time, these markets are not perfectly correlated, ie, they do not move up and down together in synchronisation. Hence, their ups and downs will tend to offset each other and serve to reduce portfolio variability and thus risk. Every individual should take advantage of varied wealth-building opportunities to maximise returns and balance risk. What investors can anticipate with confidence, is the markets will rise again.

It is normal to expect most investors will have a unique set of portfolio /investments, so there is a need for carefully tailored investment advice. It is not possible for wealth managers to provide a generic or common solution to their investors. No doubt, there have always been investors who have done it their own way, independent of professional advice,and that will continue. However, I also find there is a greater need for, and interest in, advice in times of uncertainty, which is natural. What most investors are looking for is reassurance that their portfolio is robust, while others are looking for value-added inputs about where they could make improvements. Above all, when seeking advice, people should look for advisors with a track record and strength of service. The value of market experience cannot be overstated – you need to know that whatever is happening now, they have seen it before.

The stock market bubble that burst in 2008 and what is happening in the euro zone is just the culmination of a run-up in equity valuations that began by the summer of 2003. In such environments, it is difficult, perhaps even impossible, to "keep your head". By adopting a disciplined, diversified strategy, you will increase your chances of keeping your net worth intact and growing.

The only certainty in investing – and probably in life – is uncertainty. That can make investing seem like an adventure; however, it's more like going on a long and eventful expedition than a short day trip to a park. You can't anticipate the turbulent waters or the roadblocks you may encounter, but you'll reach your destination if you plan and prepare for eventualities. To quote Sir Francis Bacon: "If a man begins with certainties, he shall end with doubts: but if he will be content with doubts, he shall end in certainties" – the markets seems to say just that.

- The author is CEO of Barjeel Geojit Securities, Dubai. The views expressed are his own