Why investing in global funds is less risky

Posted at 05/13/14 11:01 AM

MANILA, Philippines – One of the solutions in minimizing risks in investing is to diversify overseas, according to Singapore-based wealth planner Jess Uy.

On ANC’s “On The Money,” Uy said investing in global funds minimize risks related to volatility because investors can “mix and match” different assets.

“With global investments, because of the way you can mix and match different assets, these things cancel out and you can still make some profit depending on the risk that you are taking,” he said.

From ANC On The Money Facebook page

Uy said there are more risks involved in investing in the stock market because it is more focused compared to investing in a fund.

“The Philippine market in general is doing quite well. However, there is always volatility, it’s a given in any market. But in the Philippines, volatility is a bit stronger so the swings are more violent,” he said, citing the May-June 2013 plunge that saw Philippine Stock Exchange index levels drop by 2,000 points.

“If you diversified outside, you could have avoided these swings and even have positive returns,” Uy added.

From ANC On The Money Facebook page

When investing globally, investors can choose countries and asset classes while also having the option of allowing fund manager to choose assets and jurisdictions.

According to Uy, the global funds have a lower risk compared to investing in just one country.

He explained that if investors invested in the Philippine index, for example, they follow the top 30 companies with the same allocation, with a rate of return of around 1.59 percent.

If investors put their money in the US, some funds generate over 70 percent.

“If you have a diversified fund, you can feel safer that if you need your money at certain points, you will have at the most a manageable loss and hopefully, a gain,” said Uy.

From ANC On The Money Facebook page

He also said that another advantage of investing in global funds is that it does not require extensive knowledge on other countries’ economies.

“It’s always good to know but it’s not a requirement. The important thing is that you pick a good fund manager with experience,” said Uy.

The minimum amount of investment in global funds start at around S$500 to S$1,000.

Investors can choose to invest geographically through global, regional or single country funds or thematically through infrastructure, information technology, or health care.

Uy said those who usually invest in global funds are those who are too busy and don’t have time to analyze individual securities and jurisdictions; passive investors; those who want to diversify into other countries to reduce their risks; and investors looking for stability of returns.