Do you keep most of your savings in banks? Alternatively, do you invest primarily in Singapore stocks and property?
If the answer to either question is yes, you might want to consider diversifying your portfolio to make it more resilient to shocks such as the outbreak of Covid-19 that has roiled markets and economies around the world. Diversification1 can allow you to seek out opportunities in sectors such as technology, which is growing faster than more traditional industries such as banking and real estate2.
Many of the world’s top tech companies are listed outside Singapore while emerging markets from China to Mexico are also likely to see faster growth, so an experienced global asset manager like Franklin Templeton is well-positioned to help you on your investment journey.
The outlook for the global economy has become a lot more uncertain since the start of the Covid-19 pandemic, and Singapore leaders have warned that that the next few years will be difficult for the trade-dependent city-state as countries restrict travel and strive to become less economically dependent on one another.
At Franklin Templeton, we believe investors can adopt two complementary approaches to build an investment portfolio that provides both growth and protection in the event of a major crisis.
The first approach involves holding investments that can provide income from regular interest payments or diversifying from risky assets to hedge against tough market conditions. The second entails positioning for growth over the long term by investing in emerging markets and the technologies that will likely have an increasing influence on the way we work, live and play.
Both approaches can be done by allocating funds across different asset classes and rebalancing your investments regularly. This requires research and expertise, which is why entrusting your money to professional managers, who can scour the globe for the best opportunities, beats investing on your own.
With employees in over 30 countries, Franklin Templeton has more than 70 years of investment experience across all asset classes, including equity, fixed income, alternatives and custom multi-asset solutions, and over US$617 billion in assets under management3.
Protecting your investments
Although market volatility can create many anxious moments for investors, there are ways to minimise the downside. Broadly, these can be divided into three strategies that Franklin Templeton describes as Defend, Diversify and Buffer.
Defend: As a first line of defence, you may want to seek out safe-haven currencies, which tend to strengthen during times of heightened volatility. You can consider the Franklin U.S. Government Fund, which seeks to achieve income and safety of principal by investing primarily in debt obligations issued or guaranteed by the United States government and its agencies.
Diversify: Reallocating capital to invest in a wider variety of assets such as bonds, can help to reduce a portfolio’s exposure to risk. Most bonds are issued in large denominations of around US$250,000, so the best way for retail investors to invest in a diverse portfolio of fixed-income securities is via mutual funds. Diversification can be achieved through a mix of hedging strategies, which the Franklin K2 Alternative Strategies Fund* provides.
Buffer: Finally, regular income from investments in the form of interest payments or dividends can provide a cushion or buffer when markets fall. Both the Templeton Global Total Return Fund and the Franklin Strategic Income Fund invest in a wide range of assets, including those in emerging markets where yields are typically higher and there is potential for capital growth as the issuers gain in stature.
Besides guarding against downside risks, you may also want to ride on long-term trends that remain intact despite the disruptions caused by the pandemic. Franklin Templeton believes these opportunities can be found in the technology sector and emerging markets.
Technology has been dominating much of our daily lives, and the adoption of collaborative platforms has accelerated in recent months due to travel curbs and social distancing requirements sparked by the spread of the coronavirus.
Our fund managers believe the next big opportunities in technology can be found in areas such as artificial intelligence, cloud computing and e-commerce. In addition, healthcare and biotechnology companies have been applying their innovative drug discovery platforms to help manage the Covid-19 pandemic, and will also continue to be beneficiaries of an ageing population after the crisis.
If you are keen to invest in the technology sector, Franklin Templeton has a range of funds available to investors in Singapore including the Franklin U.S. Opportunities Fund, the Franklin Technology Fund and the Franklin Biotechnology Discovery Fund.
As for emerging markets, growth in the coming decades will likely be faster compared with more mature economies like Singapore’s due to forces such as urbanisation and the demographic advantage of having a population that is younger and expanding. Historically, crises have driven greater innovation, which can become a powerful source of growth in less-developed economies.
The Templeton Emerging Markets Dynamic Income Fund, which invests in a diversified portfolio of equity and debt securities, allows investors like you to ride on the growth in emerging markets.
Markets can be volatile in the short-term, and the immediate outlook for the global economy is the weakest in a decade, according to various experts including those at the International Monetary Fund4. This is, however, not the time to develop cold feet and sit on the side-lines.
Looking back over the last 20 years, those who stay invested typically achieve better returns than those who try to time the markets, due to the difficulty in identifying the peaks and troughs5.
It is therefore better to focus on longer-term trends, with the help of professional fund managers who know their territory.
Visit Franklin Templeton’s website to find out more.
1 Diversification does not guarantee investment returns and does not eliminate the risk of loss.
2 Source: Bloomberg, as of May 1. Based on S&P 500 Info Tech Index vs. S&P 500 Index. There is no assurance that any projection, estimate or forecast will be realised. Past performance is not an indicator or a guarantee of future performance.
3 Source: Franklin Templeton, as of May 31.
5 Source: Morningstar Inc, as of May 31. Based on Average Annual Total Return of S&P 500 Index. For illustrative purposes only and does not reflect the performance of any Franklin Templeton fund. Past performance is not an indicator or guarantee of future performance. Indices are unmanaged and one cannot invest directly in an index. Index returns do not reflect any fees, expenses or sales charges.
* For the avoidance of doubt, the Franklin K2 Alternative Strategies Fund is not a hedge fund and shall not be marketed as a hedge fund.
Diversification does not guarantee investment returns and does not eliminate the risk of loss.
All data are as of May 31, unless otherwise stated.
For the key risks of the various funds mentioned above, please refer to the fund factsheets.
The Funds are sub-funds of Franklin Templeton Investment Funds (“FTIF”), a Luxembourg registered SICAV.
Franklin Flexible Alpha Bond Fund, Franklin K2 Alternative Strategies Fund, Franklin Strategic Income Fund, Templeton Emerging Markets Dynamic Income Fund, Templeton Global Bond Fund and Templeton Global Total Return Fund may utilise financial derivative instruments for hedging, efficient portfolio management and/or investment purposes. Franklin Mutual U.S. Value Fund may utilise financial derivative instruments for hedging purposes and/or efficient portfolio management.
This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
This advertisement is for information only and does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. Any research and analysis contained in this advertisement has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Any views expressed are the views of the fund manager and do not constitute investment advice. The underlying assumptions and these views are subject to change. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realised. Franklin Templeton accepts no liability whatsoever for any direct or indirect consequential loss arising from the use of any information, opinion or estimate herein. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance of the Fund. Subscriptions may only be made on the basis of the most recent Prospectus and Product Highlights Sheet which is available at Templeton Asset Management Ltd or our authorised distributors. Potential investors should read the details of the Prospectus and Product Highlights Sheet before deciding to subscribe for or purchase the Fund. This shall not be construed as the making of any offer or invitation to anyone in any jurisdiction in which such offer is not authorised or in which the person making such offer is not qualified to do so or to anyone to whom it is unlawful to make such an offer. In particular, the Fund is not available to U.S. Persons and Canadian residents. Investors may wish to seek advice from a financial adviser before making a commitment to invest in shares of the Fund. In the event an investor chooses not to seek advice from a financial adviser, he/she should consider whether the Fund is suitable for him/her.
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