A client was a little upset recently that her portfolio was down by 10%. She had forgotten that she made more than 18% previously and the profit was taken out of her portfolio already. I tried to get her into bonds much earlier in 2011 but was told that her risk profile was very high. Right now, the asset allocation is 70% equities, far too much in my opinion at this stage of the cycle. Of course, I could be wrong. The rally that is over 3 years old could develop into a decade long one as seen between 1990 - 1999 or some where in the 50s.
I advised the client not to be hasty in selling off equities now because the latest OECD Composite Leading Indicator is pointing north for the world's largest economies. The April 2012 CLI for the US, EU, China, Russia, Japan, even Brazil and India are showing signs of turning around. Inflation expectations in the US is still below 3%. As long as unemployment rate in the US remain above 7% (it's now 8.2%), inflation is unlikely to rise, although it could rise very suddenly.
It's true that technicals are pointing south. AUDUSD, mining index, MSCI World have indicated that a deep correction may occur. Gold is also showing signs of deep injury that will not see a fast rebound for the next month or so.
Under such contradictory information, I tend to not buy nor sell unless the client is deep in profit.
I am looking forward to financial freedom. It is not far away. The economic cycle is nearing a point where I can do many things with my investments around the world. There will be a day that I can relax and sip my cuppa by a cafe, watching people rushing to work. I can then spend my days looking at my investment portfolio, taking care of my family, and exercising, staying healthy. The best thing in life is to get out of the rat race, and be financially free as early as possible, and enjoy the rest of my life.
I am not ambitious in the corporate world. I believe that depending on someone else to decide my future is not a route that I should pursue. Many people, especially in Singapore think that a job is a be all and end all. They worship their bosses as "gods" and constantly assess whether they are following the right God. If their God falls, they usually fall. So shifting of alliances is very important. One must be nimble at all times. I only worship one true God and not human beings.
By the way, my asset allocation has shifted to 20% equities, 10% gold, 10% commodities, 40% high yield bonds, perpetuals, emerging market debt, 20% alternatives like DB Systematic Alpha and Amundi Volatility World. I took the cue from 27 March 2012, when the AUDUSD gave me a dead cross signal.
