Wealth management demystified: It's not just for the rich

Many perceive wealth management as an issue only for the wealthy. In fact, no matter the scale of one's wealth, managing it wisely is important for everyone. A good start is the following 10 tips to demystify wealth management.

1. Start by understanding yourself. A lot of people jump straight into investing before fully understanding their own profile. We all have different tolerance to risk and volatility, so what works for others might not work for you. If the thought of investing causes sleeplessness, then find an alternative asset you can hold with less worry.

2. Put a timeline to your financial pl an. Step back from focusing on returns, and draw up your financial plan and objectives. Focus on your retirement timeline, and work out what is the required portfolio size so you can achieve the retirement lifestyle you prefer.

3. Invest regularly with discipline. Wealth accumulates with a compounding effect. Assuming you invest Bt10,000 every month, at an average return of 6 per cent per year, in 30 years the sum will be close to Bt10 million. If you can afford to invest more, the result will multiply further. Time is among the major obstacles, as investment is often not among the top priorities in our busy lives. Ask your bank for a regular plan that automatically invests for you every month without requiring you to come to the bank.

4. Don't focus too much on market timing. Market sentiments often play tricks on our minds - when we are most excited about the market, it is often a sign of overbuying. A time-tested method of investing an equal amount each month, dollar-cost average, can both save us from trying to time the market and give us the discipline of investing regularly without the noise of market movement.

5. Understand the differences among similar funds. No two funds are exactly the same. Identifying the right fund that corresponds to your view requires understanding of the strategic differences among funds with similar focus. Understand the risks, terms and conditions, and fees.

6. Diversification is not just about increasing the number of holdings. If you add more assets, but all share the same intrinsic risk, you are not diversifying the risk. For example, if all your holdings are Thai equities, then you will be fully exposed to Thailand's intrinsic risk (that is, floods, political conflict or, taken to the extreme, a financial crisis like that of 1997-98). Diversify with different asset classes, that is, fixed income, foreign funds, etc.

7. Evaluate your options from a macro view. Investment opportunities have broadened significantly over the years. Today, Thai investors can choose to invest in funds of various access classes (fixed income, equities, commodities) across many markets globally. With the broader opportunities, it is important to understand how the macro drivers (quantitative-easing measures, interest-rate trends, the global economy, etc) will affect each asset class.

8. Have a complete view of your investments at all times. You cannot achieve good diversification, or properly analyse your strategy, without a comprehensive view of your portfolio. If you don't already consolidate your investments through one bank, it is important to keep a comprehensive worksheet that combines all in one view.

9. Wealth management is different from speculation. If you are scared of investment because you feel it's like gambling or playing the lottery, you are mixing up wealth management with speculation. Surely, a lot of people in the markets are speculators, but you need not be one (in fact, you shouldn't) to be successful in managing your wealth in the long term.

10. Fully utilise your bank. On all of the above points, you should be able to talk openly with your banker. So if you feel you can't rely on your current banker to share views on your wealth-management plan, you will be better served by changing the banker. Don't settle for less.