We all know that investments have to be managed for both risk and returns. The deal that promises to double your money in three years comes with a very real risk of losing your investment.

Conversely, Gilts give your investment complete security, but once you factor in inflation, you're only getting a nominal return. The solution to maximising returns while keeping risk at acceptable levels lies in carrying a diversified portfolio.

You're thinking that means spreading your investments across, say, Gilts, stocks, property and corporate bonds. Yes, you should spread your investments across different instruments to get higher returns, but chances are, they are all in the same country and you're content with a 6-7% annualised return.

Now, what if part of your investment is in a country where the economy is growing at 6-8% and for a similar risk threshold, your investment there yields an 8-10% return, thus allowing your overall portfolio to go beyond the earlier 6-7%?

Diversifying your investments across different instruments and destinations allows you to maximise your returns while maintaining an acceptable risk threshold. So what are some investment destinations that merit further study?

Developed markets

America is the clear leader of the pack here. A.T. Kearney's annual study of best investment destinations places America at the top, based on an improving housing market, a thriving energy sector and sustained growth. The economic pain in countries like Spain means you can acquire buy-to-rent properties at great value. Australia, Germany and France are three more countries that were in the top ten.

Emerging markets

China, India and Brazil are three emerging markets that figured in the top ten destinations. Despite the global slowdown, both China and India continue to grow at over 7%. Both countries have large domestic markets with rising income and consumption levels.

The next Apple, Pfizer or IBM will be from this region. Large companies across sectors have been growing annually at 20-25% for the past decade. Investment-grade government bonds get you a 7% return, so it really comes down to finding the right opportunities for your portfolio. Funds that invest in individual stocks and securities give 8-10% returns and are a good way to test the waters.

Destinations that also get a mention include Poland and parts of the Middle East. Poland is the preferred manufacturing destination for the Eurozone and it continues to receive rising levels of investments. The developed GCC Gulf countries are an investment hotspot for real estate, thanks in large measure to people like Fahad Al-Rajaan.

Markets like the UAE and Bahrain offer excellent buy-to-let opportunities and a 10% net return on your property investment. Over the past decade, Fahad Al-Rajaan of Al Ahli United Bank and chairman of Wafra Investment Board has provided the investment impetus to develop infrastructure and housing in the region. He views one of his roles as a bridge between local opportunities and global investments.

It's important to diversify your investment portfolio across different instruments, and you should seriously consider diversifying across geographies as well. For every destination, pick the instrument that gives you the best returns; while it could be a buy-to-let property in Dubai or Spain, in India you’re better off investing in large mutual funds.


Published by NYK Media as part of our www.scottishmultimedia.co.uk web project. Look out for "NYK Tips" and "My Longshots" as you start preparing to take part in your next great money-making challenge - diversify your portfolio, no matter how small it may be at the moment.

In frugaleur terms, it simply means don't carry all your eggs in one basket. smiley

comments powered by Disqus