Managing Investment Risks in "Provident fund" at Every Age

บริหารความเสี่ยงในการลงทุน “กองทุนสำรองเลี้ยงชีพ”

We all know that how our portfolio looks is highly related to where we are in life in terms of age. We also know that in the world of investment when we invest in riskier assets, we would be simply expecting a higher return. On the other hand, we would experience a higher chance of loss. Thus, investing always come with risks that need to be taken into consideration. 

Generally, investing can be stressful for risk-averse investors. They tend to allocate their investment capital in low-risk assets which generate lower returns than expected and lead to insecure money when they retire. Moreover, we must keep in mind that inflation will continue to devaluate the value of our savings which puts more pressure on our retirement.

In addition, there are several issues that tend to put more pressure on our retirement plans such as a higher chance of retirement expenses whether they are health care expenses or rising medical expenses. Moreover, the average life expectancy of people tends to increase as medical technology increases. These factors are the risks that can affect your retirement goals.

If you are in your 50s, getting close to your retirement, asset allocation in your age must be more towards low-risk assets. You should start investing aggressively when you are young and become more conservative as you move closer to retirement. Unlike when you are young you will have years to cover your loss but losing at the age of 50s could significantly affect your financial goal.

Plan your long-term investment ahead to lower your investment risk

For example, we invest 5,000 baht per month with a 30-year investment period, 3% return compared to an investment that earns 6%. At the end of year 30, an investment portfolio that earns an average return of 3% will have a total value of 2,913,684 THB. An investment portfolio that earns an average of 6% will have a total value of 5,022,575 THB. These two investment portfolios have a different value of 2,108,891 THB. One of the best ways to reduce your investment risk is to invest for a longer period. According to the Stock Exchange of Thailand (SET) historical returns of 18 years from 2003 until 2020, if we choose to invest in a short term such as only 1 year, there may be times that we will lose up to 45%.  But if we invest in a longer period, there is less chance of loss. If we can stay invest more than 6 years, there will be no period of a loss at all. 


Do not put all eggs in one basket – Diversify your risk by asset allocation

Another way that can help reduce investment risk is asset allocation. As we can see, no asset has the best return all the time. However, over the long term, almost all assets have generated positive returns. Therefore, allocating your investment into a variety of assets, will help to reduce your investment risks in the short term and aim for higher returns in the long run.

Investing in Provident Fund is considered as a long-term investment which investor can allocate into a variety of assets. In the past, only fixed income securities and stocks within Thailand were allowed. Now, the Securities and Exchange Commission (SEC) allows provident funds to invest in a broader variety of assets. Provident funds can diversify their risks in other alternative assets and investments abroad. This is considered as an investment opportunity suitable for long-term investment.

As an investor managing our own portfolio, it is necessary to have a deep understanding of the assets especially when it comes to the risk of assets before investing. 

Choosing your suitable investment portfolio by PRINCIPAL TARGET DATE FUND

Principal Asset Management has registered “Principal Target Date Retirement Fund” to provide investor (fund member) who wishes to select assets class that he/she wants to invest. Then, the fund manager will arrange the appropriate long-term investment portfolio and adjust the portfolio for the current market situation by using the portfolio rebalancing technique. In addition, the fund manager will automatically arrange the appropriate investment policy and asset allocation to suit the member’s age.

This will help fund members to have an appropriate level of investment risk throughout their investment life. Decreasing the portion of risky assets investment as you move closer to your retirement, e.g., stocks, and switching to invest more in fixed income to help maintain initial investment and to ensure that fund members can retire securely as expected.

For further study of Provident Fund :

Contact Principal at Tel: 02-686-9595

LINE: or @principalthailand

The investors should study and understand the product (fund) feature, return condition and risk factors carefully before making an investment. Past performance is not a guarantee of future results.