Be­friend the Trend:

Finweek English Edition - - INSIGHT - STEADILY RIS­ING IN­FLA­TION, Can you weath­eweather the volatil­ity? Blair Burmeis­ter

cou­pled with his­tor­i­cally de­pressed in­ter­est rates, is chang­ing in­vestor sen­ti­ment to­wards eq­ui­ties. De­spite the wounds of 2008 still be­ing fresh in our minds, we are wit­ness­ing a pe­riod in which in­vestor con­fi­dence is be­ing re­stored by pos­i­tive growth within the eq­uity sec­tor. So, is the time right to in­crease port­fo­lio eq­uity weight­ing?

Paolo Se­na­tore, chief in­vest­ment of­fi­cer at Ash­bur­ton In­vest­ments, says: “If you take the last year or so eq­ui­ties have been much stronger than, for ex­am­ple, the bond mar­ket. The ex­pe­ri­ence over the last few years has ac­tu­ally been quite pos­i­tive.”

The idea of out­stand­ing re­turns on top of pos­si­ble div­i­dend in­come needs to be weighed in con­junc­tion with the risky na­ture of an eq­uity in­vest­ment. But if some­one fits into the right box and en­ter­tains the idea of mak­ing smart and sus­tain­able eq­uity picks then per­haps the riskier seas can be sailed with an el­e­ment of safety...

It’s vi­tal to be com­pletely compl hon­est h o n e s t w when as­sess­ing the level of risk you would like your i nvest­men nvest­ment to be ex­pose ex­posed to. Com­mon sense s as­set man­age­man ment prin­ci­ples princ ap­ply here t too – have a plan in mind m as to what you w want to achieve and

con­sid con­sider your age, tol­er­ance for risk, as well as your per­sonal wealth po­si­tion.

An­thony Katakuzi­nos, chief op­er­a­tions of­fi­cer of Stan­lib Re­tail, says: “It’s al­ways im­por­tant to have eq­uity ex­po­sure. But the ex­tent will de­pend on in­di­vid­ual cir­cum­stances. The best way is through high-eq­uity or low-eq­uity bal­anced as­set al­lo­ca­tion funds.”

Katakuzi­nos says that eq­ui­ties in the long term give the best chance of grow­ing your wealth over time and for mak­ing a de­cent re­turn. For those that are able to deal with the volatil­ity, “pure eq­uity in­vest­ment could be the ideal op­por­tu­nity”.

He adds: “But what we have found is that peo­ple pre­fer to see less volatil­ity. They pre­fer to leave the de­ci­sions to the pro­fes­sion­als as to when it is ideal to up-weight or down-weight eq­ui­ties or move into dif­fer­ent as­set classes. High-eq­uity bal­anced funds are gen­er­ally reg­u­la­tion 28 com­pli­ant,

Smart, sus­tain­able eq­uity pur­chases are what in­vestors need to be on the look­out for. It’s the com­pa­nies that are able to gen­er­ate healthy earn­ings on a con­sis­tent ba­sis that are go­ing to help you grow your wealth. Se­na­tore be­lieves it is per­haps not as im­por­tant to look at which mar­kets are at­trac­tive, but rather to look at which cor­po­rates are in the right space at the mo­ment glob­ally.

He adds: “Pur­chase those com­pa­nies that you feel rep­re­sent some kind of sub­stance and sus­tain­abil­ity of earn­ings. When you are fac­ing mar­kets with high val­u­a­tion lev­els you re­ally do need earn­ings to come through, be­cause if they don’t, you are ex­pos­ing your­self to down­side risk.”

As far as pick­ing the right per­son to man­age your funds is con­cerned, it’s cru­cial to part­ner with an as­set man­ager that has a proven track record of play­ing suc­cess­fully in the eq­uity mar­kets. Fund fact sheets are avail­able on all as­set man­agers web­sites – read up on all the avail­able op­tions and de­cide which one suits you. Do your home­work on the fund man­ager and en­sure that their phi­los­o­phy is one that you agree with.

Paolo Se­na­tore

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