7/6/2018

Long-time investors may know quite well the clichés uttered by investment analysts in certain investment situations, such as, “We have changed our SET Index targets due to new fundamentals," or, “The current returns on mutual fund investment are favorable because of some factors". Such remarks may baffle new investors, for they may not be able to figure out such fundamentals or factors, let alone their significance.

 

At present, investment globally comprises diverse asset classes, including stocks, debt instruments, oil, gold and real estate, plus millions of other individual securities. This is good for us because we have numerous investment alternatives to choose from, even if the sources of such factors are quite difficult to understand sometimes.  

 

Nevertheless, factors are fundamentally important in investment. They are almost like nutrients, such as protein, carbohydrate and fats that provide energy, vitamins and minerals to our body. We can get them from milk, bread, meats, vegetables and fruit, though not everyone requires the same daily intake because we have different body sizes, and we also use our bodies differently. Likewise, factors have different effects on returns and risks of an investment portfolio. Therefore, if we understand those factors well, we will likely be able to design an appropriate investment portfolio that meets our investment goals. Normally, investment based on factors has three major objectives, i.e., helping investors build favorable returns, reduce risks, and design an appropriate investment portfolio.

 

Investment globally is based on macro and style factors. Macro factors, namely economic growth or inflation rate, allow us to thoroughly understand the sources of returns on investment in all asset classes. For instance, stocks often offer good returns during an economic upturn. Style factors offer explanations of the sources of returns on investment in respective assets. For instance, investing in value stocks (typically meaning low-value stocks compared to fundamental factors) in the past tended to offer returns on investment higher than overall stock indexes. Other style factors that most investors are familiar with include Momentum, Minimum Volatility, Quality or Size.  

 

How, then, can investors make their investments using these factors? The best answer is through mutual funds. With the state-of-the-art technologies, fund managers are not only able to obtain varied investment data faster than general investors, but also to see a broader and deeper picture from that data than in the past. As a result, analysts and fund managers are now able to assess various situations and factors more precisely. This is why many asset management companies have introduced funds based on an analysis of various investment factors, to meet the needs and investment goals of investors.

 

The most appropriate investment style at this time is Minimum Volatility, because it helps reduce risks amid steepened volatility in stock markets. KASIKORN ASSET MANAGEMENT CO., LTD. has introduced the K Minimum Volatility Quantitative Equity Fund (K-MVEQ), with a policy of investing in Thai stocks which have been assessed as offering portfolio optimization with the lowest volatility, and diversifying investment at not more than 10 percent of the fund value in each of not more 25 stocks across all industries. Due to heightened volatility in stock markets since the beginning of 2018, K-MVEQ has been able to maintain volatility at a level below that of the SET Index, Equity Large Cap and Equity Small/Mid Cap (See Graph: the lower the standard deviation, the lower the volatility). Therefore, for those looking for a fund that is suited to the current stock market volatility, K-MVEQ is the answer.​


Investors should have a thorough understanding of the nature of products, and their conditions for returns and risks, before deciding to invest.

Prepared by Mr. Kittikun Tanaratpattanakit, Head of Product Strategy Department, KASIKORN ASSET MANAGEMENT Co., Ltd. (KAsset), on May 24, 2018.

 


 



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7/6/2018
1!มุมมองเศรษฐกิจ!Economic Analysis!situation