How successful investors buy low & sell high

Learn how to build a robust investment portfolio that suits you

A cricket team with 11 batsmen would score truckloads of runs but would eventually fail to defend the target. To win matches, it would need the firepower of the bowlers. Same is the case with investing: you don't need to bet on batsmen alone; you can spread your money across different types of assets, such as equities, bonds and cash (and cash equivalents). This is known as asset allocation.

If it is done right, you can maximise your gains and reduce the risk element, regardless of which asset class is hot in the market. This is why choosing and maintaining the right asset allocation is perhaps the most important decision for any type of investor.

Chasing the tail...

Since asset allocation brings together the best of both worlds - maximised returns, low risk - there is a tendency among investors to keep tinkering with it, especially during changing market conditions and rate cycles. In fact, there is an entire category of mutual funds and a pretty popular one which is based on the premise of dynamically altering asset allocation based on outside pressures.

At Value Research, we don't recommend this approach. We believe a hyperactive rebalancing strategy, based on chasing trending assets, can trap you in a price bubble. This leads to the question: how can asset allocation help you achieve the holy grail of buy-low, sell-high? Keep it static, simple! That's our homespun K.I.S.S. strategy. Don't chop and change your asset allocation, unless there's a major market movement. Rebalancing your portfolio once a year should suffice and allow you to acquire assets at a lower price when the market is down.