Excerpts from a monthly investment outlook by Financial Alliance (FA) sent to its clients recently.

In November 2008, Financial Alliance (www.fa.com.sg) became the first and only Financial Adviser Firm in Singapore to achieve both the Singapore Quality Class and the People Developer status.

Sani Hamid, Director (Economy & Market Strategy)

Key points:

• Our belief remains that the next few months will see equity markets hit a “soft” patch. They will be expected to remain volatile, although less than what we have experienced over the past 12 months. They will meander gradually to the south, sagging investors’ confidence along with them. We believe the second half will see more of a traditional challenge: slower global growth.

• Economic data would be increasingly negative, consumer sentiment would wane as the global slowdown hits employment and financial markets would slide lower as investors lose confidence and liquidate their investments. But this would be an excellent time to rebuild one’s equity position.

• We are advocating a dollar cost averaging strategy to re-enter markets over a 10-month period. Such a strategy will see investors take on risk in a gradual manner, i.e., an investor’s exposure to the equity market increases over time.

We are advocating a dollar cost averaging strategy to reenter markets over a 10-month period. Such a strategy will see investors take on risk in a gradual manner, i.e., an investor’s exposure to the equity market increases over time. Hopefully this strategy will help investors overcome their fear of re-entering the market under the present uncertain environment.

Q. How are you proposing investors re-enter the market?

FA. In essence, we have been on a defensive mode since August last year and have thus sat out the volatility that has swept equity markets. However, the FA Investment Committee believes it is now time to re-enter and re-build our equity positions. The Committee is proposing that clients move back into equities in the following manner:

1. for existing clients following one of our five risk-based portfolios, there will be a gradual switch back into equities over the next 10 months. These switches are likely to be done every 2 to 3 months and will also involve a switching of funds into regions/countries/sectors which we believe will do well when the next upswing in global growth occurs,
 
2. for new clients or existing clients with new inflows, we are introducing 4 Market Recovery Portfolios (MAP*) which involves a monthly investment over a 10-month period into regions/countries/sectors which we believe will do well when the next upswing in global growth occurs. These 4 portfolios will suit investors with moderately conservative, moderate, moderately aggressive and aggressive risk profiles;

3. for new and existing clients who are somewhat risk-averse to the volatile environment but would want some exposure to the equity market, we are introducing an Endowment-Unit Trust Structure (EUTS*). This should work for those seeking some form
of capital preservation.


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