Between the options mentioned below, which would maximize my returns in long term such as 10 years or so even more? - Seedly
 

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Asked by Anonymous

Asked on 07 May 2019

Between the options mentioned below, which would maximize my returns in long term such as 10 years or so even more?

Assuming there is a recession coming in months/years to come. Is it wise to set your risk to lowest possible now and change the risk to highest when the recession hits and pump in money so that more ETF/equities can be bought? or we can just set the risk to the highest from now on and pump in money when recession hits? are both the scenarios, if not, could you explain the differences?

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Don't plan to time the market. Stick to your risk profile and stay invested. Markets will go up and down, it's inevitable, but we only don't know when.

One thing that has been certain so far, is that even if you invest at the highest points before a crash in a globally diversified portfolio, but stay invested for a good 15-20+ years, you will still be in the green.

We've been expecting a crash since 2016. Hasn't happened. If you stayed defensive, you'd missed out huge gains in 2017. If you turned defensive at the end of last year, you'd miss out on one of the highest quarter YTD returns for the start of 2019.

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Question Poster

08 May 2019

Thanks for your answer. Does that mean if i invest in a globally diversified portfolio and put the highest risk( my preference since I only put whatever excess money I have after considering my savings). when the crash happens and I pump in more money in the robo. It would be better in the long run?
Hariz Arthur Maloy
Hariz Arthur Maloy

08 May 2019

Theoretically, yes. But having the acumen and mentality to put in money when the world looks like its ending is another thing.
Tai Zhi
Tai Zhi, Chief Investment Officer at Autowealth
Level 6. Master
Updated on 07 Jun 2019

Yes, I certainly agree with Gabriel and Hariz. Let me share with you my observation during the 2008 GFC.

During that period I was still in the sovereign wealth fund GIC. Investment professionals were split in opinions on whether a crisis is about to unfold. Even professionals with decades of experience cannot time the market, so I would really suggest individual investors not to fall for the disillusion of timing markets. We are just not as sharp as gurus like George Soros, unfortunately.

Secondly, many investment professionals were way pessimistic or conservative way too early. They held high allocations to cash and tend to miss the run-up.

When the crisis finally develop, they panic thinking it would be the end of world stock markets ("this time is different" phenomenon) and did not buy into the discount, thereby squandering away a precious market opportunity.

Therefore, in conclusion, its more discipline to maintain a consistent risk profile throughout. Astute investors would have always set aside emergency funds. If there are no foreseeable need for the emergency funds, you may utilise part of it to take advantage of market corrections that presents itself from time to time to improve your investment returns. Do replenish the utilised portion when you receive your subsequent months of wages though.

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Question Poster

09 May 2019

Thanks! appreciate it

Set and forget. Advantage of robo advisor is you can set a plan, set your regular contributions, and forget. Really just go pursue your hobbies, do something else to occupy time.

You can check back in once every few months or even once a year. The less emotional ties you have with your investment the better, so there will not be any panic mode selling or euphoric buying.

Maximizing returns over 10 years will also depend on your risk profile that you have done for the robo sign up. Different risk levels will have different expected or projected returns. If you can take the maximum drawdown risk, you will also expect the maximum returns.

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Question Poster

08 May 2019

Thanks for your answer. My preference is highest risk since I only put whatever excess money I have after considering my savings. So whatever money I put is not necessarily needed in any time frame in my life. So in lieu to that, for globally diversified portfolio(ETFs) for sure it will go up( might take long or very long(15-20 years) ) but for sure it will go upsince its not a single stock, This is my thinking. does this makes sense?
Gabriel Tham
Gabriel Tham

08 May 2019

Yup! long term buy and hold, time is the market is key!