In short, your portfolio should be constructed taking into account the economic
and political landscape. Your asset allocation strategy should pay attention to long-term
valuation yardsticks and the state of the general investment environment. More importantly,
you should be investing for long-term.
You may combine the three broad asset classes of stocks, bonds and cash with a mixture
of domestic and international. Your allocation would basically depend on the outcome
of your research. For instance, you may want to reduce your exposure in the local
stockmarket given the current volatile market conditions.
Apart from the economic and political risks, there are other potential risk factors
which you should take note of when constructing your portfolio. There are currency
risk, availability of information, different transaction costs, administrative costs
plus settlement problems.
Considering the volatility of international markets, you are likely to review your
portfolio more frequently. You may construct a ýmodelţ portfolio based on the ideas
formulated from research and test them for a specific period of time preferably a
You are likely to review your asset allocation or investment strategy more frequently
if you find that the return is far from satisfactory. Your plan may require some
fine tuning, or even a complete overhaul particularly if the condition of the market
you are in varies dramatically.
Clearly, what we have discussed has been greatly simplified. It is always preferable
that you discuss in detail your plan with knowledgeable investment professionals
who can provide you with impartial investment advice.
Investing in various investments in different markets can be rewarding as it spreads
your investment risk but it can also be detrimental to your wealth if the investments
were not properly managed.
Generally, an easier alternative to get access to international financial markets
is to invest in various unit trusts or mutual funds managed by professionals. To
summarize, split your money among various asset classes and focus on them