How not to lose money in Gulf stock markets

Industry experts feel that a retail investor with the resources available at his disposal should trust investment professionals, with a track record.

  

Saturday, Apr 23, 2016

Dubai: You may have heard more stories of people losing than making money in stock markets in the Gulf. In more than one instance, we have seen investors resorting to trading in select stocks through advice taken from social networking sites, or through group messengers among others, but fund managers feel that such advise may prove to be lethal because most of the time they originate from a biased, uneducated source, which cannot be relied upon.

Industry experts feel that a retail investor with the resources available at his disposal should trust investment professionals, with a track record.

“Over the long-term investment professional always outperform an average retail investor,” Nadi Bargouti, managing director of asset management at Emirates Investment Bank told Gulf News, adding “investors need to be prudent, be very selective, and have a long-term investment horizon”.

Do your homework

Making a quick buck in the market is a very very difficult or an impossible task.

“This problem [of making a quick buck] has been persistent in this region for years. Investors believe that they understand the market very well, and they follow the herd mentality. They try to buy the stock whose fundamentals are not sound, and usually late. They take ill-informed decisions as they try to time the market,” Bargouti said, adding “You have to do your homework in your investments, invest in fundamentally sound companies. You don’t buy certain stock because it is just shooting up.”

One way to invest in stocks and other asset class is through mutual funds.

“One of the key benefits of buying through mutual funds is diversification. By investing through mutual fund you are buying effectively a portfolio and buying a group of shares rather than a single share. You also get the benefits of professional management. It’s the diversification on the risk management side and professional management side,” Rodney Aldridge, head of EMEA sales at Barings told Gulf News.

“Its also the transparency that mutual funds provide in terms of the underlying investments, and fair valuations. This would enable investors to take some informed decisions,” Aldridge said.

Paying fees

All investment advice comes with a fee, and that has been a sticky point for investors, who often see that they are getting overcharged by the asset managers.

Aldridge gives the example of the United Kingdom’s market.

“One of the big developments there has been focus from the regulator that there is complete transparency in terms of what they are paying for platform or investment management. And that changed quite rapidly, I would anticipate such rules would move to other markets all around the world including the Middle East from a structural perspective,” Aldridge said.

In terms of service offerings available to them, in the UK market now, there is a clear distinction of the services that clients would offer to investors.

“At one end you have execution only, they want to use the intermediary to make the decisions on their behalf. In the middle we have advisory services,” Aldridge said.

Rebalancing

Due to the massive volatility, investors are becoming more risk averse towards equities, and have been taking a re-look at their portfolios.

“Clients have started re-looking at portfolios in a down market. In the last six to eight months of volatility, investors are looking if investments are relevant, and taking steps to reshuffle the portfolios,” Aldridge said.

In the past two years, according to Aldridge, the focus has been multi asset funds or income generating funds.

“There has been growing demand for multi asset funds in 2014-2015 as investors moved away from fixed income products. People have been moving away from equities because of risk, and also fixed income products. The trend towards multi-asset products or products that deliver real return with low volatility, and that has been a trend that has been developing now for a number of years,” Aldridge said.

For example, the Barings multi asset fund is more than 45 per cent in equities and 12.5 per cent in listed property firms, another 12 per cent in alternatives such as aircraft leasing. infrastructure financing, renewable themes, etc.

Selective

Finally, experts are doing what they do the best, which is to advise.

“The advice that we always give investors is especially in volatile times like these that you need to very selective. Volatility is very high, and economic fundamental position is very different than what they were a few years ago,” Bargouti said.

By Siddesh Suresh?Mayenkar?Senior Reporter

Gulf News 2016. All rights reserved.


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