Unlike any event in recent memory, the Covid-19 pandemic served as a stark reminder that when it comes to financial planning, diversity is key.
A balanced and diversified portfolio of assets is imperative to maintaining and increasing wealth, and those with a diverse portfolio were better able to weather the storm at a time when there was significant volatility and turbulence in the markets.
Best-performing sectors
The pandemic has created challenges as well as new opportunities for investors seeking to diversify their portfolios.
Even as some sectors – airlines and hospitality, for example – went through a difficult cycle, others such as technology, e-commerce and cloud-based computing companies performed well.
Some of the best-performing investments have been in healthcare. This sector is likely to continue to be prominent in 2021, although for different reasons.
While healthcare has largely not been a focus from a growth investment point of view for a long time, an increased focus on innovation along with the pandemic saw biotech become an emerging market that is expected to broaden going forward.
There is also a huge focus on environment, social and governance-focused investments, as more investors realise how these values support their portfolios and provide them with significant opportunities in growing areas such as clean energy, energy efficiency and new technologies.
Various rating agencies, such as Moody’s and Standard and Poor’s, are increasingly using ESG disclosures in their credit ratings – showing that the ESG metric is not a fad anymore. On the contrary, it is becoming an important component of the cost of capital and ultimately having a material impact on businesses.
The importance of asset allocation
One way to adapt to these changing trends is through asset allocation; an investment strategy that helps to create a diversified portfolio by spreading investments across multiple asset classes.
This is vital as every asset class has a specific risk-return profile with varying correlations, ensuring that each reacts differently to similar market conditions. Put simply, by choosing diversified assets wisely, one can benefit from market conditions while remaining sheltered from adverse movements.
In periods of major economic upheaval – such as the pandemic – diverse portfolios help limit losses. However, it is important to remember that while one particular investment may do well at a certain time, no one particular investment will outperform others over the long-term.
With this in mind, a diverse portfolio can help an investor smooth out peaks and troughs and remain consistent.
A diverse portfolio can help an investor smooth out peaks and troughs and remain consistent
It can also be a key factor towards making a transition from a high-net-worth individual to an ultra-high-net-worth individual. Although HNIs already have a steady inflow of wealth to reinvest into family businesses, the stock market or real estate, a planned and balanced asset allocation strategy can go a long way towards securing significant gains in wealth.
Broadly speaking, there are four main benefits to asset allocation.
Achieving the desired return: There is a marked difference in the return potential of each asset class, especially when considered over the longer term. While some asset classes can offer above average returns over the long term, others offer more security and lesser returns.
To move towards and achieve your financial goals, while maintaining the portfolio value, it is imperative that you diversify your assets in ratios best suited for your requirements and risk profile.
Limiting risk to portfolio: The main aim of savings and investments is to protect and grow your wealth. This makes risk mitigation as important as investment growth. Now, if you invest only in low-risk assets, you face the risk of not generating the returns required to achieve your financial goals.
On the other hand, if you invest primarily in high-risk assets, you face the risk of losses and even capital erosion. Asset allocation, however, can help to achieve a tenuous balance between protection and growth by ensuring that a mix of assets can improve the risk-adjusted returns of your portfolio.
Lowering concerns over timing the market: Not even the most seasoned investors can consistently time the markets such that they enter at the bottom and exit at the high. Asset allocation entails investing in multiple asset classes in a certain proportion, based on your risk-return requirements. Thus, entry and exits are systematically decided based on the weights assigned to each asset class.
For example, assume that your portfolio is allocated 60 per cent to equities and 40 per cent to debt. In a rising market, the value of your equity investments increases, thereby increasing their weight in your portfolio.
Adhering to your asset allocation strategy means booking some profits in your equity investments and reducing their weight back to 60 per cent in your portfolio. Thus, the exit decision is systematically made. This is also applicable to the entry decisions.
Overcoming personal biases: Humans are imperfect beings and we could often be wrong in our judgement of the market. A strategic asset allocation ensures that wealth is optimally divided between asset classes, limiting interference from personal or behavioural bias.
Such a diversification ensures that the portfolio is safeguarded from potentially hazardous misjudgments.
Mufazzal Kajiji is the head of Mashreq Gold and executive vice president of Mashreq Bank
Spider-Man: No Way Home
Director: Jon Watts
Stars: Tom Holland, Zendaya, Jacob Batalon
Rating:*****
The specs: 2018 Jeep Compass
Price, base: Dh100,000 (estimate)
Engine: 2.4L four-cylinder
Transmission: Nine-speed automatic
Power: 184bhp at 6,400rpm
Torque: 237Nm at 3,900rpm
Fuel economy, combined: 9.4L / 100km
Essentials
The flights: You can fly from the UAE to Iceland with one stop in Europe with a variety of airlines. Return flights with Emirates from Dubai to Stockholm, then Icelandair to Reykjavik, cost from Dh4,153 return. The whole trip takes 11 hours. British Airways flies from Abu Dhabi and Dubai to Reykjavik, via London, with return flights taking 12 hours and costing from Dh2,490 return, including taxes.
The activities: A half-day Silfra snorkelling trip costs 14,990 Icelandic kronur (Dh544) with Dive.is. Inside the Volcano also takes half a day and costs 42,000 kronur (Dh1,524). The Jokulsarlon small-boat cruise lasts about an hour and costs 9,800 kronur (Dh356). Into the Glacier costs 19,500 kronur (Dh708). It lasts three to four hours.
The tours: It’s often better to book a tailor-made trip through a specialist operator. UK-based Discover the World offers seven nights, self-driving, across the island from £892 (Dh4,505) per person. This includes three nights’ accommodation at Hotel Husafell near Into the Glacier, two nights at Hotel Ranga and two nights at the Icelandair Hotel Klaustur. It includes car rental, plus an iPad with itinerary and tourist information pre-loaded onto it, while activities can be booked as optional extras. More information inspiredbyiceland.com
How to help
Send “thenational” to the following numbers or call the hotline on: 0502955999
2289 – Dh10
2252 – Dh 50
6025 – Dh20
6027 – Dh 100
6026 – Dh 200
Dark Souls: Remastered
Developer: From Software (remaster by QLOC)
Publisher: Namco Bandai
Price: Dh199
Countries offering golden visas
UK
Innovator Founder Visa is aimed at those who can demonstrate relevant experience in business and sufficient investment funds to set up and scale up a new business in the UK. It offers permanent residence after three years.
Germany
Investing or establishing a business in Germany offers you a residence permit, which eventually leads to citizenship. The investment must meet an economic need and you have to have lived in Germany for five years to become a citizen.
Italy
The scheme is designed for foreign investors committed to making a significant contribution to the economy. Requires a minimum investment of €250,000 which can rise to €2 million.
Switzerland
Residence Programme offers residence to applicants and their families through economic contributions. The applicant must agree to pay an annual lump sum in tax.
Canada
Start-Up Visa Programme allows foreign entrepreneurs the opportunity to create a business in Canada and apply for permanent residence.
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
Business Insights
- Canada and Mexico are significant energy suppliers to the US, providing the majority of oil and natural gas imports
- The introduction of tariffs could hinder the US's clean energy initiatives by raising input costs for materials like nickel
- US domestic suppliers might benefit from higher prices, but overall oil consumption is expected to decrease due to elevated costs
Company profile
Name: Thndr
Started: October 2020
Founders: Ahmad Hammouda and Seif Amr
Based: Cairo, Egypt
Sector: FinTech
Initial investment: pre-seed of $800,000
Funding stage: series A; $20 million
Investors: Tiger Global, Beco Capital, Prosus Ventures, Y Combinator, Global Ventures, Abdul Latif Jameel, Endure Capital, 4DX Ventures, Plus VC, Rabacap and MSA Capital
The biog
Age: 19
Profession: medical student at UAE university
Favourite book: The Ocean at The End of The Lane by Neil Gaiman
Role model: Parents, followed by Fazza (Shiekh Hamdan bin Mohammed)
Favourite poet: Edger Allen Poe
UAE currency: the story behind the money in your pockets
More from Neighbourhood Watch:
Jiu-jitsu calendar of events for 2017-2018:
August 5:
Round-1 of the President’s Cup in Al Ain.
August 11-13:
Asian Championship in Vietnam.
September 8-9:
Ajman International.
September 16-17
Asian Indoor and Martial Arts Games, Ashgabat.
September 22-24:
IJJF Balkan Junior Open, Montenegro.
September 23-24:
Grand Slam Los Angeles.
September 29:
Round-1 Mother of The Nation Cup.
October 13-14:
Al Ain U18 International.
September 20-21:
Al Ain International.
November 3:
Round-2 Mother of The National Cup.
November 4:
Round-2 President’s Cup.
November 10-12:
Grand Slam Rio de Janeiro.
November 24-26:
World Championship, Columbia.
November 30:
World Beach Championship, Columbia.
December 8-9:
Dubai International.
December 23:
Round-3 President’s Cup, Sharjah.
January 12-13:
Grand Slam Abu Dhabi.
January 26-27:
Fujairah International.
February 3:
Round-4 President’s Cup, Al Dhafra.
February 16-17:
Ras Al Khaimah International.
February 23-24:
The Challenge Championship.
March 10-11:
Grand Slam London.
March 16:
Final Round – Mother of The Nation.
March 17:
Final Round – President’s Cup.
Company%20profile
%3Cp%3ECompany%20name%3A%20Shipsy%3Cbr%3EYear%20of%20inception%3A%202015%3Cbr%3EFounders%3A%20Soham%20Chokshi%2C%20Dhruv%20Agrawal%2C%20Harsh%20Kumar%20and%20Himanshu%20Gupta%3Cbr%3EBased%3A%20India%2C%20UAE%20and%20Indonesia%3Cbr%3ESector%3A%20logistics%3Cbr%3ESize%3A%20more%20than%20350%20employees%3Cbr%3EFunding%20received%20so%20far%3A%20%2431%20million%20in%20series%20A%20and%20B%20rounds%3Cbr%3EInvestors%3A%20Info%20Edge%2C%20Sequoia%20Capital%E2%80%99s%20Surge%2C%20A91%20Partners%20and%20Z3%20Partners%3C%2Fp%3E%0A
The specs
Engine: Dual 180kW and 300kW front and rear motors
Power: 480kW
Torque: 850Nm
Transmission: Single-speed automatic
Price: From Dh359,900 ($98,000)
On sale: Now
Ain Dubai in numbers
126: The length in metres of the legs supporting the structure
1 football pitch: The length of each permanent spoke is longer than a professional soccer pitch
16 A380 Airbuses: The equivalent weight of the wheel rim.
9,000 tonnes: The amount of steel used to construct the project.
5 tonnes: The weight of each permanent spoke that is holding the wheel rim in place
192: The amount of cable wires used to create the wheel. They measure a distance of 2,4000km in total, the equivalent of the distance between Dubai and Cairo.
Engine: 5.6-litre V8
Transmission: seven-speed automatic
Power: 400hp
Torque: 560Nm
Price: Dh234,000 - Dh329,000
On sale: now
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Clinicy%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202017%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Prince%20Mohammed%20Bin%20Abdulrahman%2C%20Abdullah%20bin%20Sulaiman%20Alobaid%20and%20Saud%20bin%20Sulaiman%20Alobaid%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Riyadh%3Cbr%3E%3Cstrong%3ENumber%20of%20staff%3A%3C%2Fstrong%3E%2025%3Cbr%3E%3Cstrong%3ESector%3A%3C%2Fstrong%3E%20HealthTech%3Cbr%3E%3Cstrong%3ETotal%20funding%20raised%3A%3C%2Fstrong%3E%20More%20than%20%2410%20million%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Middle%20East%20Venture%20Partners%2C%20Gate%20Capital%2C%20Kafou%20Group%20and%20Fadeed%20Investment%3C%2Fp%3E%0A
