| Your Current Asset Allocation is a Good Starting point |
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As a private investor, it means I now need to take the sword myself, and take some time to manage my own money myself. So where do I start? Building the big picture. I put together all my assets, pension plans and insurance coverage, and I look at the big picture to understand the asset allocation of my portfolio, its long term trends and the insurance coverage. Using the Prosperity Planner, I get the overview as shown in the Figure below by dragging and dropping the relevant icons in the graph. A double click on the icon enables me to set the different parameters.
As can be seen from the figure, I currently allocated more savings in cash than anything else. This is partly due to the current financial market turmoil for which the best strategy for the moment is to have cash. My CPF is 100% in cash, with many parameter setting possibilities as shown in the Figure below. Double click on the icon to see the parameters.
Having a my portfolio heavily allocated in cash for the moment is certainly a wise thing, however, to capture the value of cheap investments it will soon be time to start shifting my portfolio towards equities and real estate. The asset allocation picture is important to keep in mind and to track. Indeed, the past few years saw many investors pouring money in equities, resulting in portfolios overweight in risky securities. The risk level was very low compared to its historical average, and guess what, now suddenly the risk level surged tremendously. Your asset allocation should be in line with your risk appetite. Fine tuning it in function of the economy is a good way to optimize returns and manage your portfolio, but losing sight of the big picture of your allocation brings you into troubled waters. Market sentiment changes very rapidly, and a good allocation can suddenly turn out to be way above your risk appetite level, resulting in sleepless nights, at least for me.
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tycho