Risk Returns and Investment Classifications

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Risk Returns and Investment Classifications

You can called it sorting by asset classes, investment product types or investment categories. They all kind of mean the same thing with the objective of making sense of the investment universe. Besides allocating between them, got to take into consideration their nuances in terms of RRTTLLU (7 considerations for investment products)Blending them in appropriate proportions that best express your required view and your own individual RRTTLLU requirements.

WhatsApp Image 2018-06-11 at 3.35.59 PM

Source: Pg37, 3 Dimensions of Successful Investing. SIAS Investment Guidebook in collaboration with SKBI for Financial Economics, SMU

There is a lot of literature on this subject and observe the overlaps, which means clear cut segregation of the categories’ is futile and will not do justice to observable truths about the individual characteristics of each instrument. Just as in material science, malleability, ductility and hardness mean different things. Investment products do have their lingo worth noting too. They each have their own RDMILT (Expected Returns).

Let us consider a bullish view on Gold. How can a person express such a view.

  1. You can buy physical gold directly from goldsmith shops (or UOB bank Raffles Place)
  2. You can buy gold ETF or gold unit trust (again there exist UOBAM Gold UT)
  3. You can buy gold mining companies’ listed equity
  4. You can buy gold futures contracts

Clearly the same view can be expressed so differently with their nuances associated with the instrument chosen.

If you would like assistance in structuring your portfolio, make an appointment with me today.

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13 Comments

  1. […] to know what asset allocation blend to consider in structuring your investment […]

  2. […] proper. It is ludicrous to expect 10% returns on your 6month fixed deposits.Plus there are different expectations for different asset classes. So how does a person set a required rate of return and are there methods to do just that? Returns […]

  3. […] the process loop. One iteration involves the client, to employ RRTTLLU and the other involves the dynamic market universe requiring RDMILT to set proper return expectations. Actually the advisory process will blend the 2 […]

  4. […] instrument of choice to express your view is another decision point. How familiar are you with the asset classes to structure/tilt your own portfolio? Do you want leverage with it? What is your RDMILT and […]

  5. […] has different risk profiles. But one can mix and blend a whole plethora of instruments (see instruments) to express your unique investment […]

  6. […] I start, please familiarise yourself with categories of investment types, their own characteristic RRTTLLU as well as RDMILT. They need to be integrated into a framework as […]

  7. […] belong to the Derivatives Asset Class if you must know. And if you would like to explore how it can be used in conjunction with other […]

  8. […] we do need to know what are the various strategies out there available. This is different from asset allocation by the way. Some deploy technical analysis, fundamental analysis or even blend them both. But […]

  9. […] Those aren’t portfolio allocation […]

  10. […] purposes of this write up do not warrant it, but yea sure go ahead if you want to include the other asset classes as […]

  11. […] it can be used for chopping vegetables or it can be used to stab someone. DLCs belong to the derivatives asset class . To hedge or not, to speculate or not, it’s all about the view right? What is […]

  12. […] you refrain from certain types of investments like property, REITs or value investing. The list of investments/strategies/approaches is infinite and no way am I discriminating […]

  13. […] are nuances to the choice of instruments in expressing whichever investment views one might have. For elaboration, read here. (Thou shall not repeat what has already been said. Here’s to show consistency across all blog […]

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