Asset allocations for mutual funds

Economy February 17, 2014 00:00

By Fund Management Department,

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As you prepare for investment in mutual funds this year, we recommend that you allocate your investment in every asset, including bonds, global equity, and Thai equity.

Here are our views on each asset and sample mutual-fund allocation for moderate-risk investors this year.

Thai bond market. Allocate 30 per cent of your investment here. This year, because of the outflow of foreign funds from the Thai bond market after the United States’ tapering of its monetary stimulus, we expect the policy interest rate to increase, since the Bank of Thailand should slow down this outflow to the US and Europe. To maintain your cash flow, allocate some investment to money-market funds or short-term bond funds, and then allocate some to term funds or rollover funds with a one-year investment horizon.

Global stocks. Invest about 65 per cent here. Global stocks performed well in 2013, with the MSIC World Index rising around 20 per cent. Worldwide, the Nikkei 225 Index was the best performer with a rise of more than 50 per cent due to the economic-stimulus policy of the Japanese government and the depreciated yen, which enhanced exports.

Japan’s stock market is therefore still our investment pick this year; we project the Nikkei 225 to reach 22,000 points by 2018. We recommend that you invest in a mutual fund with a policy to invest in Japanese stocks so as to benefit from that country’s economic growth.

For European countries, we expect their overall economy to recover gradually after their governments start easing their monetary policies. Also, the private sector has begun to add more investment after a slowdown during the economic downturn. Besides, we expect the European Central Bank to keep its policy rate low to ease economic growth.

European stock markets are our other pick for this year. You can choose to invest in a mutual fund with a policy to invest in European stocks with auto-redemption when the net asset value per unit passes required levels, such as Bt10.50, Bt11 and Bt11.50 from par. Thanks to auto-redemption, you will earn some cash flow during your investment period.

Stock Exchange of Thailand. Allocate 5 per cent of your investment here. This year we expect the SET Index to spring a market surprise after being pressured by many factors last year, including economic growth, a slowdown of listed companies’ earnings growth, and political issues. However, developed countries' economic recoveries will be a boon to Thailand’s economy. Besides, the prices and values of Thai stocks are relatively low now, so this year represents perfect timing for investing in them.

For those who have little time to invest personally in Thai stocks, we recommend that they gradually invest in mutual funds with a policy to invest in Thai stocks with a dividend-payment policy. That way, they will get some cash flow during their investment horizon. The investment strategy is to buy, hold, or trade to earn a profit. In our estimation, the SET should perform well in the second and third quarters this year.

Since investment involves risks, please study information carefully before deciding to invest.