Diversification: Hedging against uncertain times
Tan Jee Yee | 10 Aug 2018 00:30
For the world economy, trouble is brewing on the horizon. A trade war may be imminent – the potential fallout of other geopolitical happenings that are undoubtedly worrisome. Closer to home, certain changes are equally worrying to local investors. We may have changed governments, but that doesn’t signify an immediate change for the better.

We ought to worry. Worrying is fine. Worrying means we can prepare and be mindful of any impending crisis. Worrying too much, though, and we fail to act  rationally. The idea, of course, is to be prepared.

For investors, being prepared isn’t just about hedging your bets on the brightest possible investment. Being prepared here is to manage your risks accordingly, to avoid losing all the eggs even as the baskets they’re in burn and fizzle. This means putting the eggs in multiple baskets, of different types and materials and design. In investment terms, it means diversifying your portfolio.

How do we do this and why? Ricky Chau, vice-president and portfolio manager of Franklin Templeton Multi-Asset Solutions (FTMAS), addresses what sort of trouble is brewing on the horizon and why asset diversification is important in light of this.

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