How can you relate a soccer analogy with investments? Easy. You can relate it for your asset allocation.
Successful asset allocation accounts up to 91% of a person’s financial success. What is asset allocation? It’s basically how you put your asset strategically into the different asset classes. This way you can optimize your return and minimize your risk.
Using the Soccer Analogy, we’ve broken down the best way for you to allocate your assets. Whether you’re a retail or enlightened investor, you definitely need to check this out!
The goalkeeper acts as a safety net which is where insurance and emergency funds come in. Insurance protects you from financial risks. Emergency funds are funds that you use when you encounter unpredictable circumstances. Similarly, if the standard goalkeeper blocks the ball from the net, your insurance and emergency funds blocks potential risks from your finances.
Bonds are known as fixed-income investments – they are investors who lend money to companies or the government. In return, the borrower will pay a fixed rate of interest. EPF, as we all know, guarantees a fixed dividend rate. And endowments provide policyholders investment returns. All three ensures stable fixed income thus why they act as defenders – to protect you from rising inflation.
Forwards, also known as strikers, have the main objective of scoring goals. In investments, the forwards main goal is to score for profits. For instance, your businesses. Your business, of course, will generate your main income. They also have the potential to give the best returns.
Midfielder is an important position because they typically need to be good at defense and offense. Stocks, unit trusts and REITs make great midfielders because the returns you gain can make a significant difference in your wealth. They are great additional income (offense) and a stronger safety measure (defense).
The asset strategy for the enlightened investor is a little different than the retail investor. Who are these enlightened investors? They consist of the rich and wealthy whom have high net worth. Their risks are different and so are their priorities. Therefore, their asset allocation will also be different.
Similarly like the retail investors, the Goalkeeper for the enlightened investors are insurance or emergency funds.
Their Defenders include REITs. REITs is one of the most lucrative industries for investors. In Malaysia, REITs distributes at least 90% of its current year taxable income. That means, REITs dividends distribution in Malaysia is higher compared to other corporations. Therefore, they’re incredibly stable. That means,
Established companies are companies that cannot go bankrupt. These companies are so interwoven with our daily lives, we simply cannot survive without them. For example, VICOM in Singapore. VICOM has 70 per cent market share. In other words, out of the one million cars in Singapore, 70 per cent will go to VICOM. As you can see, these companies are the epitome of a stable company.
For enlighten investors, their Midfielders are stocks (growth stocks, in particular). Growth stocks are incredibly risky but they are also the stocks with the greatest potential. Again, the returns make great offense and defense.
Undervalued properties is another Midfielder. They are properties sold at a discounted price, relative to its ‘intrinsic value’. As the market declines, properties can become undervalued simply because people are pessimistic over their value. It’s during this time where investors have the opportunity to buy properties at low prices. And because properties can rise back up as the market cycles, this creates potential profits. However, if profits aren’t coming in, the enlighten investor still won’t lose a dime.
The Soccer Analogy for Investors! The way you allocate your assets can make a huge difference if you plan to seek financial freedom. So, consider the type of investor you are and follow this guide!
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