Thailand – diversifying your investments globally reduces risk

13 Aug 2019

Thailand is one of the fastest growing economies in Asia, and the Thai Baht has strengthened against the major currencies over the last few months. 

When local currencies are performing well, it is very tempting to increase your investment percentage into local funds. But, it is wise to remember, not to carry all  your eggs in one basket. 

In the past, investment portfolios were invested in a few local funds and a few funds linked to the major economies and currencies like US and UK. If these economies performed badly, then so did your investment. 

Fortunately, not all global markets are affected by what happens to these heavy weights. 

It is advisable to have a globally/geographically diversified portfolio that spreads your risk. More funds from more economic areas.

 What is Global Diversification?

The ‘financial dictionary’ defines Global/International diversity as: The attempt to reduce risk by investing in more than one nation. By diversifying across nations whose economic cycles are not perfectly correlated, investors can typically reduce the variability of their returns.

By spreading your investment over other global economic markets as well, you are decreasing your risk. For example, If you are invested in three markets and one doesn’t do so well, then you have 1/3 loss as opposed to investing in 7 markets where your loss is only1/7.

Benefits

  • Your risk is mitigated as it is spread out over more markets
  • More stability for your investment in the long term – Short term unstable economic events in certain markets are buffered by other unaffected markets in your portfolio

Besides local, US, UK and EU markets, there are other international markets in Asia and the Middle East like Japan, UAE and Qatar, and emerging markets like India, Russia and Brazil, that have been doing favourably, and more and more investors are spreading their investments to include these markets.

Broadgate Securities offers an international investment strategy that aims to provide clients with a comprehensive picture of the global economy and regular updates on current stock market and fixed income trends, in order to assist investors in making informed investment decisions.

The chart below shows a typical long-term balanced portfolio based around 60% global equities and 40% global bonds
 
Speak to your Broadgate consultant today about diversifying your portfolio and lowering your risk or contact us on [email protected]