Asset Allocation 01 (Jun 09 - Jul 13)

[Cherry]

kennynah wrote:

given any global economic downturn, it is not sufficient to simply diversify by asset class...all of them could devalue at the same time...property, stocks, commodities, bonds, etc...

Ken

Is cash considered an asset class? (Sompah, I really don’t know.)
Wouldn’t it be ideal to turn all assets into cash and keep them in banks just before the global economic downturn?
And wouldn’t it be ideal to turn all cash into other assets just before the global economic upturn?
What about Gold?

[kennynah]

i suppose Cash could be considered the most liquid of all assets...

the only problem associated with hoarding cash is Inflation... holding onto cash is a sure way of eroding its value over time by the devilish inflation.... imagine that your folks left you a princely sum of $200K some 50 years ago... which at time time, is the equivalent of ~$850K in today's value, assuming some 3% inflation annual average...is nothing more than $200K now... looking at it from an opportunity cost angle... the value depreciated some $650K over 50 years...

i suppose it is debatable whether gold or other precious metals are better investments during a severe global economic downturn... afterall, in an open market, price equilibrium is set by demand and supply... it would be hard for demand to increase or even maintained, when all around, people are losing jobs... recall that Gold's largest demand is in the manufacturing of jewelry...a consumer good.

but i suspect.. cherry baby... you know all these... u testing me..i know...

[Poles]

Wouldn’t it be ideal to turn all assets into cash and keep them in banks just before the global economic downturn?

you mean another Big one coming????
many ppl say we will never see the lows of March 09......u meant the show is not over yet???

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[Cherry]

kennynah wrote:

given any global economic downturn, it is not sufficient to simply diversify by asset class...all of them could devalue at the same time...property, stocks, commodities, bonds, etc... and hence, for the very serious and cautious investor, it is more the science of hedging that is required to protect he/her investment portfolio...

cherry wrote:

Wouldn’t it be ideal to turn all assets into cash and keep them in banks just before the global economic downturn?
And wouldn’t it be ideal to turn all cash into other assets just before the global economic upturn?

Kennynah wrote:

the only problem associated with hoarding cash is Inflation...

Ken

Cash is NOT hoarded permanently.

Cash is held only temporarily during the period of global economic downturn,
a time when there is deflation,
a time when nearly all other asset classes are dropping in prices,
eg in the past few years when oil fell from $140+ to $30+ and DBS from $18+ to $6+;

Then, just before the economic downturn becomes the economic upturn,
Cash is turned into other asset classes, temporarily, during the period of global economic upturn,
a time when there is inflation,
a time when the price of nearly all assets, other than Cash, rise,
eg in the past months when oil rise from $30+ to $60+ and DBS from $6+ to $13+.

Perhaps, I was not able to make myself clear. Sorry lah, Ken.


To think of it, to create wealth, a good strategy would be to:
1. turn investment assets into Cash just before a downturn, and
2. turn Cash into investment assets just before an upturn.

(So that when the golden opportunity knocks on your door,
you have the cash to answer it.)

The Difficulty is how to identify an impending downturn, and an impending upturn in a life market?

Ken, with your very brilliant brain and your very brilliant buddies here in investideas, if each were to contribute a few points, critique/edit each others’ ideas, a good guide can be polished up.

Doable?

[Cherry]

kennynah wrote:

imagine that your folks left you a princely sum of $200K some 50 years ago... which at time time, is the equivalent of ~$850K in today's value, assuming some 3% inflation annual average...is nothing more than $200K now... looking at it from an opportunity cost angle... the value depreciated some $650K over 50 years...

If the $200K, some 50 years ago, was invested in property in Singapore, it could buy 4 big bungalows of 6000 sq ft land area, freehold, near the east coast.
Now, the 4 bungalows can be sold for $16M to $20M.

The power of CORRECT INVESTMENT! Investing in the correct asset class!

No need to work. Just Kiow Kar (Hokkein – sit and shake legs) the investment can earn you big $.

A word of caution though, invest wrongly, can lose big $ too.

So, how to invest correctly? Which is the correct asset class at any one time?

[kennynah]

So, how to invest correctly? Which is the correct asset class at any one time?

isn't this the exact question, all of us have been pondering all our trading/investing lives

[Cherry]

poland wrote:

you mean another Big one coming????
many ppl say we will never see the lows of March 09......u meant the show is not over yet???

Hi Poland

Thank you for the music video. Very good, I like it.

If I were to tell you, "Yes, I saw another Big one coming, STI would drop >60 pts", I am bluffing you as I can now see that STI has dropped 70 pts.

I wish I have the wisdom to know. I really don’t know.

Perhaps we can all try to find a way to make an intelligent guess to identify the 'Big one'. Many people here are very intelligent. If they were to go slow a bit. Intensify more than extensify, map out their strategies, they have the potential to offer themselves and us something good, very good.

[Cherry]

cherry wrote:
So, how to invest correctly? Which is the correct asset class at any one time?

kennynah wrote:
isn't this the exact question, all of us have been pondering all our trading/investing lives

No. I don’t think so.

I think in all your trading /investing life so far, you were focusing on
Open a position or Close a position; a Long position or a Short position, mainly in the equity market.

Another way to do investing is
Which asset class to be in?
Cash, equities or …

However, the first option has more actions: chiong in, chiong out.
The second option is slow moving, look at the big picture, then the FA and TA, and is not short term trading.
Different style suits different people.

I hope you don’t mind me being so frank. It is with good intention. Sorry, if you feel offended. More likely than not, you are doing very well using your present system.

Please don’t get angry. I send you a big ‘mau san wang’ durian, ok?

[winston]

TOL:-

1) After thinking of Asset Allocation across Asset Class eg. Equities, Cash, Properties, Bonds, Cash etc., it's time to also think about how to allocate the Equities component

2) "Long Fund" managers can keep a small amount of Cash as mandated by the fund. The rest of the fund must be invested in Equities no matter how euphoric the market is. So how are the "Long Funds" allocating their Equities component now ?

3) Growth ? Dividends ? Cyclicals ? Consumer Discretionary ? Blue Chips ? Special Situations ? Commodities ? Asset Plays ?

4) Most experts are asking you to buy Cyclicals as they say that the economy is rebounding. My impression is that the long funds are afraid and are actually parking their money in the less risky sectors eg. Dividend Stocks, Asset Plays and Turnarounds rather than Growth and Cyclicals

What do you think ?

[Aspellian]

But I tot i am seeing more of the smaller funds jumped the gun by investing in small- cap stocks and crossing 5% disclosure as a result.

maybe the big boys are not biting yet on the small cap. some of the small caps even doubled with retail investors pumping up the price..

most stocks are now taking a breather. maybe the funds just needs a clear direction that the market will go higher before plunging in for a final frolick.