Investing? Diversify!

Just sold off some investments I did 2 years ago in funds. Did these investments with a bank I was before. Been sometime I looked at it and thought now is a good time with the whole Cyprus issue and all.

Walked into the bank and asked for my portfolio. I glanced at the printed copy of my portfolio and was dismayed to find a particular fund that showed -12% under the rate of return column. Looked at the fund that was at negative 12%, Global Property. Alamak since when I have this fund man! Probably I did, it was one of those decisions I made that since global property has been going down the only way is up. Wrong call....

Glanced at the other funds I had. An asian managed dividend paying fund and a Singapore fund. 5% (excluding the dividends I got over 2years) and 29% respectively. Woohoo! Whatever losses I made in the property fund is nicely covered by my other 2 funds.

I have been an advocate of long term investments (though 2 years ain't that long term, but this is tactical asset allocation), diversified asset allocation and dollar cost averaging. This strategy has helped give potential returns of about 10% per year. Though like they say past experience is not indicative of future performance, but diversification has helped all the time.

Some of you may argue that Tang 10% could be something I do in an hour. Sure but will you tell me if you lost 10% in an hour? The fact is if something can give you a potential return of 10% in an hour it also potentially can give you 10% losses in the same hour. And that, like I have mentioned in my previous post is not investment but speculation.

And again it is not wrong to speculate, but do so only when you have core financial planning done then go speculate, knowing that losing 10% in an hour is not going to affect future plans. In fact, even if you lost all your money in the casino or spent it on all the quick picks in every Singapore Pools in Singapore for the 10 million price draw, you are rest assured that future plans will not be affected, then go ahead do it! Come on admit it, we all dream that one day when we tio the Toto we will throw resignation letter in our bosses face.

I have secretly dreamed that if I did tio the Toto, I will photocopy and blow up my Toto ticket and paste it behind me in my work station, then chill and do minimal work just to hit KPI, just to justify my existence. My winnings left in a dividend paying fund drawing 4%, for every million it is $40,000, can sustain my daily living and working is just getting more money from the company. Boss walks out of the room and say Tang your performance not up to standard, without looking at him, I use my thumb to beckon him to look at my winning ticket. Boss no choice walks back into room. If only....

Sigh...

But that was corporate life. Now I am the boss, resignation letter I throw in my own face :).

So before you foray into investments ask yourself some questions:

1. How long is my time horizon?
2. Is my core financial portfolio in place?
3. How much am I able to lose?
4. Is the investments I am going into diversified?

There are many solutions that fit different needs and risk profile so start taking action, because what you do today will impact your future.