As the financial landscape of 2024 unfolds with global uncertainties, explore strategic investment insights for building a resilient portfolio in the face of market volatility and opportunities.
As we embark on the journey through 2024, investors are met with a landscape brimming with both opportunities and challenges. With a record number of elections globally, including the pivotal November US elections, and a backdrop of geopolitical tensions and lingering pandemic concerns, the year ahead promises to be one of volatility. However, amid this uncertainty, there are strategies investors can employ to build resilient portfolios and capitalise on market opportunities.
Strategic Asset Allocation
One of the cornerstones of building a resilient portfolio is strategic asset allocation. This involves distributing investments across different asset classes, such as equities, bonds, cash and cash equivalents, property and alternative investments, in a manner that aligns with one’s risk tolerance, investment goals and time horizon.
In 2024, amid the potential for geopolitical tensions and economic uncertainty, diversification across asset classes will become even more crucial. By spreading investments across various assets, investors can mitigate the impact of any single event or market downturn on their overall portfolio. For instance, while stocks may offer growth potential, fixed income can provide stability during times of market volatility, while alternative investments with a negative correlation to equities can help reduce overall portfolio risk and volatility.
Smart Diversification
Diversification within asset classes is equally important. Within the stock portion of a portfolio, for example, investors should consider diversifying across sectors, industries and geographic regions. This can help reduce the risk of concentrated exposure to any one sector or region-specific event.
Furthermore, alternative investments such as real estate, commodities and cryptocurrencies can offer additional diversification benefits. These assets often have low correlations with traditional stocks and bonds, providing a hedge against market downturns and inflationary pressures.
Ringgit Cost Averaging
In times of market volatility, emotions can run high, leading investors to make impulsive decisions that may not align with their long-term goals. Ringgit cost averaging (RCA) offers a disciplined approach to investing that can help mitigate the impact of market fluctuations.
With RCA, investors commit to investing a fixed amount of money at regular intervals, regardless of market conditions. This strategy allows investors to buy more when prices are low and fewer when prices are high, ultimately lowering the average cost over time.
Investing Beyond Borders
Investors are encouraged to venture beyond their home country for investment opportunities, recognising the risks associated with concentrating investments in a single region. Global diversification provides access to a broader range of opportunities, potentially capitalising on faster-growing economies and emerging industries.
This approach also serves as a risk management strategy, helping to mitigate the impact of currency fluctuations and geopolitical events that may affect a specific market.
In 2024, promising investment prospects can be found in countries such as the United States, Japan, Taiwan and South Korea. The United States stands out for its diverse economy, innovative companies, and robust financial market, making it a crucial element in many global investment portfolios.
Japan, despite facing economic challenges and an ageing population, remains a leader in technology and manufacturing, with opportunities in sectors like robotics, healthcare, and renewable energy. Taiwan and South Korea, home to world-leading technology firms, particularly in semiconductors, present appealing growth opportunities.
Diversifying across these geographies enables investors to tap into diverse industries, currencies, and economic cycles, enhancing portfolio resilience and potentially boosting returns.
Riding the Commodities Wave
In 2024, commodities are likely to shine, driven by a confluence of factors including supply chain disruptions, inflationary pressures and increased demand from emerging markets. The stage is set for a commodities supercycle, with metals, energies and agriculture expected to lead the charge.
Investors can capitalise on this trend by allocating a portion of their portfolios to commodities or commodity-related assets. These assets can serve as a hedge against inflation and provide diversification benefits during periods of market uncertainty.
Unlocking Crypto Potential
The crypto market continues to evolve rapidly, presenting both opportunities and risks for investors. The approval of spot bitcoin ETFs in January 2024 by the US Securities and Exchange Commission (SEC) marks a significant milestone for the industry, signalling growing acceptance and mainstream adoption.
Additionally, the Bitcoin halving event, which occurs approximately every four years and reduces the rate at which new bitcoins are created, has historically been associated with price appreciation. While cryptocurrencies remain volatile and speculative assets, they can offer diversification benefits for investors with a high-risk tolerance and a long-term investment horizon.
Another new development in Malaysia is staking approval by Malaysia’s Securities Commission (SC), allowing crypto using a proof-of-stake concept like Ethereum to be staked and being rewarded with additional crypto for helping to validate the blockchain.
Tapping into REITs
Real Estate Investment Trusts (REITs) have faced headwinds in recent years due to factors such as interest rate hikes and stagnating market prices. However, for investors with a long-term perspective, REITs can still play a valuable role in a diversified portfolio, offering steady dividends while looking forward to the next property market recovery cycle.
REITs offer exposure to income-generating real estate assets such as commercial properties, residential complexes and infrastructure projects, including logistic hubs and data centres. Despite short-term challenges, REITs can provide stable cash flows, inflation protection and potential capital appreciation over the long term.
Building a resilient investment portfolio requires careful planning, diversification and a disciplined approach to investing. By following these strategies and staying attuned to market trends, investors can navigate the opportunities and challenges of 2024 with confidence and build a foundation for long-term financial success.
ABOUT THE WRITER
Stephen Yong is an Executive Director at Wealth Vantage Advisory, driving strategic growth. He also actively promotes financial literacy to help Malaysians simplify and grow towards financial freedom.
