SCB WEALTH has analyzed lessons from the past year and identified three key issues hindering investors from maximizing returns: 1) Timing investments accurately is essential; refrain from constant speculation; 2) Optimal investing involves diversification; and 3) Persistence in staying invested is crucial. Investors are urged to split their investments into a Core Portfolio for medium- to long-term holdings, and an Opportunistic Portfolio for profit-seeking opportunities. Confidence in asset allocation allows investors to navigate market fluctuations and potentially achieve satisfactory returns.
Mr. Roongroj Seksunwiriya, Senior Vice President of the SVP, Investment Product Selection & Partnership at Siam Commercial Bank provided valuable insights demonstrating that the 2023 SCB WEALTH investment analysis revealed three crucial lessons applicable to 2024 to ensure portfolio stability and the ability to generate robust returns amid market volatility. These include: 1) Precision in timing investments is essential; avoid constant speculation: Analyzing the S&P500 index in relation to daily trading values revealed that on days with significant stock increases, trading volumes were higher, indicating heightened speculative activity. Choosing to invest during market upswings may expose portfolios to increased volatility. Therefore, strategic investment during market downturns presents a greater opportunity for generating substantial returns.
2) Diversification is integral to optimal investing: Reflecting on the early part of 2023, the market anticipated economic and investment trends, with expectations of a sharp increase in interest rates by the US Federal Reserve, which would potentially impact various companies' operating costs. While this initially raised concerns, by the end of 2023 surprising outcomes emerged. The S&P 500 Index increased by 24.7%, the Nasdaq Index surged by 44.5%, and the Dow Jones Industrial Index (DJI) rose by 13.70%. Interestingly, the Chinese stock market benefited from the country's reopening, leading to a recovery in the consumption sector, yet the CSI 300 index saw a return of -11.7%. In Thailand, positive expectations from the reopening of China and a flourishing tourism sector did not translate into stock market gains, as the Thai stock index recorded a -15.6 % decline. Contrary to expectations of downward pressure due to high-interest rates, gold prices increased by 12% at the close of the year. Despite these unexpected outcomes, investors are advised to adhere to a key principle: diversify risks by incorporating a variety of assets into the Core Portfolio to ensure the potential for satisfactory returns, regardless of market fluctuations.
3) Persistence in staying invested is crucial: If, over the past year, investors continue to believe in the potential and strength of the US economy, maintaining investments in the US stock market without significant adjustments or portfolio reductions is likely to yield favorable returns. Nevertheless, 2023 statistics indicate an increase in investments in money market funds, suggesting that many investors tend to adjust their portfolios or reallocate investment proportions during periods of stock market volatility, deviating from the strategy of staying invested. There is an anticipation that if central bank interest rates decrease, investors might progressively shift towards investments in the US, Japanese, and European stock markets.
Following the lessons learned in 2023, SCB WEALTH advocates a refined approach to portfolio management in 2024, proposing a two-part investment strategy:
1) Core Investment Portfolio: This involves constructing a core investment portfolio that diversifies risk across various assets, encompassing fixed income, stocks, and alternative assets. Setting medium to long-term investment goals (approximately 3-5 years) and minimizing excessive buying and selling are key principles. Recommended assets include the SCBGA fund, where the fund manager adjusts the investment weight across various assets, and the SCBDBOND(A) fund for debt instruments, with the fund manager adapting proportions based on market conditions. For ultra-high-net-worth clients, allocating a portion of the Core Portfolio to alternative assets like BCRED-O outside the market is advised.
2) Opportunistic Portfolio: This involves allocating some investments based on the insights of various investment advisors. Investors can choose funds with higher risk than core funds, aiming for short-term returns. In case of unexpected outcomes, the limited investment proportion in this section will not significantly impact long-term investment expectations in core assets. SCB WEALTH recommends the KT-INDIA fund in this segment, known for consistent performance and a strategy of investing in large stocks in the Indian stock market. Additionally, investments in structured products and Dual Currency Note Pricing (DCI) are suggested, providing returns influenced by desired exchange rates. For details on other intriguing assets, investors are encouraged to consult the bank's relationship managers before making investment decisions.
Cautionary Note:
- Investing carries risks. Investors are advised to thoroughly understand product characteristics, conditions, returns, and associated risks before making investment decisions.
- Past performance does not guarantee future results.
- As the funds do not hedge the entire amount against exchange rate risk, investors may experience gains or losses due to fluctuations in the exchange rate, potentially receiving a refund lower than the initial investment.
- Investing in high-risk or highly complex products differs from investing in general investment products. It is advisable for investors to seek additional advice from financial professionals before making such investments.
- Further information about master funds and mutual fund prospectuses can be found on the websites of SCB Asset Management Co., Ltd. and Krung Thai Asset Management PCL.
- For further details, please contact the SCB Call Center at 02-777-7777.
Source: Siam Commercial Bank