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The 3-Step Guide To Building A Globally-Diversified Portfolio With Just S$200/Mth February 7, 2012
This article will take you step-by-step through building a simple portfolio with just two funds.
Author : Nick Tay


Untitled Document

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There are three common reasons why beginners don’t build a globally-diversified portfolio.

1. Lack of time - it’ll take forever to gain exposure to the different markets; it’s too slow!
2. Lack of resources - I’ll be dead broke if I invest S$1000 into 17 markets and 5 regions; it’s too expensive!
3. Lack of knowledge - I don’t know how; it’s too complicated!

If you’re just getting started, chances are at one point or another, those three thoughts have crossed your mind, sometimes all at once. This article hopes to respond to all three thoughts.

Three questions, three answers

Of course, this article won’t solve all your concerns, but it will try to address the three common ones we highlighted above.

1. Lack of time - it’ll take forever to gain exposure to the different markets; it’s too slow! - After reading this article, you could build a globally-diversified portfolio in as little as 10 minutes
2. Lack of resources - I’ll be dead broke if I invest S$1000 into 17 markets and 5 regions; it’s too expensive! - Actually, all you need is S$200/mth, or the willingness to set aside less than S$7/day each month
3. Lack of knowledge - I don’t know how; it’s too complicated! - This article will show you how in three simple steps

But before we get into the process, let’s manage expectations.

This is a simple portfolio – it’ll set you down the road of investing from a portfolio point of view, (which we believe is a more systematic and consistent way to approach investing in general), but to be perfectly honest, it won’t give you the high-octane return exposure that comes from more volatile assets, such as Emerging market equities, or small cap equities.

You will need an active Fundsupermart account, (or you’ll need to sign up for one, don’t worry its free), and we’ll be making use of the RSP (Regular Savings Plan, read all the way till the end for a special RSP promotion), which allows investors to invest in a range of funds at a minimum S$100/mth investment. The typical initial investment for most funds is S$1000.

So here are the 3 simple steps.

Step 1: From Table 1, choose a global equity fund from the RSP list

Table 1: Global Equity Funds in RSP List

Aberdeen Global Emerging Markets *Recommended*

FTIF-Templeton Global Fd A(acc) SGD

PRU Global Basics Fd SGD Cl

United International Growth Fund

Infinity Global Stock Index

source: iFAST Compilations, as at 27 January 2012

Step 2: From Table 2, choose a global bond fund from the RSP list

Table 2: Global Bond Funds in RSP List

DWS Lion Bond Cl A *Recommended*

FTIF-Templeton Glb Bond A(mdis) SGD-H1 *Recommended*

PRU Mthly Income Plan Cl A *Recommended*

FTIF-Templeton Glb Total Ret A(mdis) SGD-H1

Legg Mason WA Global Bond Trst

LionGlobal Bond(Cl A)

PIMCO Total Return Bond E SGD Hed

source: iFAST Compilations, as at 27 January 2012

Step 3: Start a S$100 RSP into the two selected funds
Apply for RSP here, link.

And that’s all there is to it.


Slowly Does It
You’re probably feeling a little incredulous at how simple it is: two weakly-correlated assets, two recommended funds, one portfolio, one modest S$200 monthly dollar-cost-averaged investment and, presto, a balanced portfolio.

Remember, this is just a start for beginner investors who want to get their feet wet. This portfolio will give you a taste of what to expect when investing – the highs and the lows, the gains and the losses, and the benefits of watching your bond fund hold steady while your equity fund swings with market sentiment.

This gradual easing into investing is important for beginners, because picking up bad habits early (such as making large speculative bets on highly volatile and illiquid markets) is a recipe for eventual portfolio disaster. Start with a manageable amount of capital, get some experience, and keep on learning.

Related articles:

Give your child a better education with the power of RSP
3 Baby Steps To Building Your First Profitable, Globally-Diversified Portfolio

Nick Tay tweets randomly on Twitter, connects with people on Facebook or Google+, and loves all things investing, social media and Youtube. If you have feedback, you can email, or leave a post on the forum. I promise to read all feedback, and will make every effort to respond where possible. If you know of anyone who can benefit from this article, do a favour and share it with them– but only if you think it’s worth sharing!


iFAST and/or its licensed financial adviser representatives may own or have positions in the funds of any of the asset management firms or fund houses mentioned or referred to in the article, or any unit trusts or Singapore Government Securities bonds related thereto, and may from time to time add or dispose of, or may be materially interested in any such unit trusts or Singapore Government Securities bonds. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any fund. No investment decision should be taken without first viewing a fund's prospectus. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Past performance and any forecast is not necessarily indicative of the future or likely performance of the fund. The value of units and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer in the website.


 
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DWS Lion Bond Cl A
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FTIF-Templeton Global Fd A(acc) SGD