FSM Recommended Portfolio Revamp and New Factsheets
We have recently revamped the FSM recommended portfolios. The revamped portfolio takes into account a more systematic manner of asset allocation so as to better ensure that rewards for each risk profile would be more commensurate with the risks taken. Investors would be able to follow our target allocation with as little as RM20,000. The recommended portfolios now come with factsheets which would provide relevant information such as market commentary, portfolio commentary and our portfolio actions on a monthly basis. (Click here for factsheet of Balanced Portfolio). We will explain our thinking behind the new portfolio construction.
Overweighting equities
In times when we view that bonds and equities are equally attractive, all five portfolios would allocate to bonds and equities in the “NEUTRAL” allocation as stated in Table 1. However in times where we think that equities are more attractive, we would allocate 10% more into equities (Overweight Equities) as compared to the bonds. On the other hand, we will allocate 10% more into bonds (Underweight Equities) as compared to equities when we are bearish on equities.
Table 1: Portfolio Allocation Based On Equities And Bonds
Conservative |
90% |
10% |
80% |
20% |
100% |
0% |
M- Conservative |
70% |
30% |
60% |
40% |
80% |
20% |
Balanced |
50% |
50% |
40% |
60% |
60% |
40% |
M- Aggressive |
30% |
70% |
20% |
80% |
40% |
60% |
Aggressive |
10% |
90% |
0% |
100% |
20% |
80% |
Allocation of bond funds
Within the bond allocation, we are allocating 70% into Malaysia bond funds while the remaining is channeled into Asian bond funds owing to a significant portion of bond funds in our platform which are Malaysian-based and limited bond funds which offer overseas or global exposure. We find little need to allocate more non-Malaysian bond funds as bond yields in Malaysia are relatively high.
Allocation of equity funds
As for equity allocation, we have funds focusing on different regions such as Global, Asia Ex-Japan, Malaysia, Global Emerging Market (GEM) and single country/sector. The more aggressive the portfolio, the greater percentage allocation that we place for regions or sectors which have greater volatility such as global emerging markets and single country/sector. We have also included a supplementary portion only for Moderately Aggressive Portfolio and Aggressive Portfolio to enhance the returns of these portfolios albeit with higher volatility. For now, we are allocating 10% and 20% supplementary portion to Moderately Aggressive Portfolio and Aggressive Portfolio respectively which are invested into single country/sector funds. Our portfolio allocation based on regions or sectors are shown in Table 2.
Table 2: Portfolio Allocation Based On Regions And Sectors
Malaysia/MYR Bias Bonds |
56% |
42% |
28% |
20% |
|
Asian Bonds |
24% |
18% |
12% |
|
|
Global Equity |
10% |
20% |
24% |
28% |
32% |
Asia Ex-Japan Equity |
|
10% |
12% |
14% |
16% |
Malaysia Equity |
10% |
10% |
12% |
14% |
16% |
Global Emerging Market Equity |
|
|
12% |
14% |
16% |
Single Country/Sector Equity |
|
|
|
10% |
20% |
Total |
100% |
100% |
100% |
100% |
100% |
Choice of funds
We have chosen funds below for the relevant mandate and on FSM recommended funds methodology where we look at performance, expense ratios and resiliency of the funds. Based on Table 2, we have selected funds to reflect the percentage allocation in our 5 portfolios as shown in Table 3. Table 3 shows the chosen funds and their respective target allocation in the portfolios.
Table 3: Portfolio Allocation Based On Funds
Affin Capital Fund |
Malaysia Bond |
28% |
21% |
14% |
10% |
|
AmDynamic |
Malaysia Bond |
28% |
21% |
14% |
10% |
|
RHB Asian Total Return Fund |
Asian Bond |
24% |
18% |
12% |
|
|
OSK-UOB Smart Treasure Fund |
Malaysia Equity |
10% |
10% |
12% |
14% |
16% |
Prudential Asia Pacific Fund |
Asia Ex-Japan Equity |
|
10% |
12% |
14% |
16% |
Prudential GEM Fund |
Global Emerging Market Equity |
|
|
12% |
14% |
16% |
OSK-UOB Global Equity Yield Fund |
Global Equity |
10% |
20% |
24% |
28% |
32% |
OSK-UOB China Big Cap Enterprise |
Single Country Equity |
|
|
|
5% |
5% |
OSK-UOB Global Capital Fund |
Single Sector Equity |
|
|
|
5% |
5% |
OSK-UOB Resources Fund |
Single Sector Equity |
|
|
|
|
5% |
OSK-UOB Emerging Opportunity Unit Trust |
Malaysia Equity - Small Cap |
|
|
|
|
5% |
Total |
|
100% |
100% |
100% |
100% |
100% |
Conclusion
We believe that the revamped portfolios could be good references for investors looking to set up a diversified investment portfolio based on their respective risk profile. Investors should monitor their portfolios regularly by reviewing their holdings and rebalancing on a periodical basis or when the need arises. We believe that investors will be rewarded over the long term if discipline is put into handling their portfolios in a systematic way.
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