Diversification is a term commonly used to describe a key component of every long-term portfolio. But what exactly is portfolio diversification and how does it help investors to weather different market conditions, as well as increase their portfolio resilience?
Smart investing is making decisions for the long run instead of a quick fix. The long-term goal is to maximise returns while minimising risk. A key step to ensuring this is portfolio diversification - allocating capital in a way that reduces exposure to any one particular asset or risk.
A diversified portfolio would hold assets that have low correlation, allowing price movement in the various assets to counteract each other, increasing portfolio resilience.
The DBS Chief Investment Office (CIO) believes that Core-Satellite Approach is the way to build resilient and diversified portfolios. This approach aims to help clients balance risk and reward, and is a key investment philosophy at DBS Bank.
The Core portfolio is multi-asset, global and long-term to decrease overall volatility, while the Satellite portfolio is short-to-medium term and opportunistic to capture trending themes and sectors. This allows investors to enjoy the rewards of both stability and seasonality, weathering the ups and downs of market conditions.
Utilising the Barbell Strategy
A common question their clients ask: How should we construct our Core portfolio? To that end, the DBS CIO utilises the Barbell Strategy - balancing growth equities for maximum capital gains, with income-generating assets.
On the Growth end:
Go all in on I.D.E.A. companies. These include the Innovators, Disruptors, Enablers, and Adapters - a stock selection framework to sieve out companies that challenge the status quo, embrace a digital world, transform and thrive. Examples include electric vehicles and life sciences to name a few.
But there is no such thing as returns without risk. Therefore, these high-growth stocks will inevitably face volatile price movements. This is where the other side of the Barbell comes in - to help mitigate this volatility.
On the Income end:
Stock up on dividend-yielding equities and bonds - the income nature of these assets provides resilience to the overall portfolio.
The Barbell Strategy, when implemented for the long term, will demonstrate resilience, while capturing superior returns from growth trends. This gives investors the confidence to stay the course and ride out market volatility.
Leveraging on a team of experts
Honoured as the World’s Best Bank and the World’s Best Digital Bank in Euromoney’s Global Awards for Excellence 2021, DBS Treasures Private Client offers a team of experienced portfolio managers, investment strategy, product and research specialists to provide their clients with resilient and diversified portfolios to optimise risk-adjusted returns.
Discretionary Portfolio Management (DPM) is one such personalised investment service. The DPM team meets personally with its clients to understand their goals for their business, family, and retirement, and design bespoke investment solutions to achieve them.
The DPM team works closely with the Chief Investment Office led by CIO Hou Wey Fook, ensuring the banks’ investment strategies are employed in the investment solutions for their clients.
This is strengthened by a strong focus on risk management and Environmental, Social, and Governance (ESG) considerations, enabling their clients to grow their wealth in a sustainable and accountable way.
Access to digital wealth banking
Clients also have access to the DBS digibank mobile app, which they can use to invest, plan, and bank without having to switch between apps.
Through digibank, clients are also provided with a detailed view of asset movements, holdings, transactions, allocation, and analysis - sortable by market value, investment amount, currency and more.
Additionally, personalised research and insights will be curated based on the client’s portfolio with investment ideas that can be acted on immediately, ensuring a smooth and seamless way to grow, protect, and enjoy your wealth.
Gain the edge today with DBS Treasures Private Client. Simply indicate your interest here and a Relationship Manager will be in touch with you soon.