Investment Portfolio Management

February 1, 2009 | By admin In Property Investment |

Investment portfolio is important sector in property investment. Over the years, real estate has proven time and again its stability, attractive returns and ability to hedge against inflation. Thus, it is not surprising that most of the rich invest substantially in property investment.

It is an expert opinion that most people’s Asset Allocation Model and Investment Portfolio should look something like this (give or take 5%): Assuming you have RM100,000 set aside for investment purposes, at least RM60,000 should be invested in properties. Less than RM30,000 go directly into the stock market and the balance (less than RM5,000) into high risks, highly leveraged, volatile investments such as Options, Futures or Foreign Exchange (Forex).

Many people make the mistake of concentrating too much of their time and money into the upper levels of the pyramid, as their investment portfolio returns are highly volatile and unpredictable.

First, it’s extremely important to build up a solid investment base using real estate before venturing into other investments to give your investment portfolio regular and predictable rental income and to enjoy capital appreciation.

If you have an hour per day to look after your various investments, you ought to be spending 60% of that time for properties, 30% for equities and less than 5% for high risk investments. If you have invested, at least two hours per day over the next three years mastering the subject – a hidden fact many are unaware of.

In Malaysia, two main direct investment vehicles are real estate and stocks. Property investment are stable and long term in nature, whereas the stock market is volatile and short term. Hence one needs to practice tactical asset allocation between these two.

One of the mistake in property investment is buying investment products giving single digit returns with high upfront charges.You should only take the risks and invest when you see the opportunity to make more than double of what you can save with minimal risks.

For real estate, it’s advisable to have a investment portfolio of various property types. Whichever way the property cycle goes, you will be able to enjoy benefits either from rentals or appreciation.Your foundation must be solid.

For beginners, start investing for rental returns beginning with medium cost apartments.
The risks are minimal as long as your chosen location is strategic. Using creative financing techniques, you might have even bought properties with little or zero down payment and achieved a positive cash flow.It’s extremely easy to earn long term compounded returns from both rental yields and capital appreciation of 10-12% p.a.

Once you have built a firm base, move up and invest in landed houses for capital appreciation.The risks here are higher as landed properties will give you negative cash flow if you put in the minimum down payment.Your ultimate goal in property investments is to eventually move to the commercial sector once your budget grows to RM1 million. Your investment portfolio might change when your capital is grow up along your investment industry.