Investment strategies in turbulent times
Question:
What secure investment would you suggest that can provide reasonable income and growth?
Sent (September 1, 2007)
Answer:
By: ACL
We are living in turbulent times: The share market meltdown after the bursting of the high-tech bubble, 9/11, the cataclysmic financial crash in Argentina, successive wars in Afghanistan and Iraq, and closer to home - Palestinian terrorism. The list goes on and on.
Investors today face tough choices. International interest rates are at all time lows, and the equity markets are hardly for the faint-hearted Where then can the prudent investor turn for security and expect reasonable income or growth?
As a financial professional, the first rule I advise any clients, is that an investment portfolio needs to be properly diversified. Vis-à-vis the current global market, this diversity there should be prudently proportioned in a range of financial instruments such as shares, bonds, property, cash deposits and currencies. This will afford the necessary protection that if any particular component in the portfolio drops in value, it will have a reduced negative impact on the overall portfolio.
One particular investment that I strongly advocate including in an investment portfolio, is United Kingdom commercial property. Despite turbulence elsewhere in the markets, this sector has consistently performed well. The nature of the commercial property market is such that where these properties are well managed and long-term lease agreements are secured, reasonable returns have generally materialized. They are currently running at over 8% per annum, and in some cases even higher.
An important element of any investment is liquidity. Are one’s funds readily accessible should the need arise? Normally in property-based investments this is presumed to present a problem - it is not always possible to quickly realize a property or to exit partially from such an investment.
The solution is to hold property in the form of property mutual funds. These can be sold, and the funds can be quickly accessed. In addition, one is able to ascertain the value of ones investment at any time, by reference to the trading price of the mutual fund units.
In conclusion, commercial property mutual funds are a strategic part of a well-balanced investment portfolio, and should be considered as an investment option even in today’s turbulent times.