How low-risk, high-liquidity portfolio service can offer investors profitable returns in uncertain t

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Events of recent weeks have sent a chill through financial markets as investors try to interpret the broader implications of bank failures in the United States and Switzerland, a spike in oil prices, and increased geopolitical tensions highlighted by a series of military exercises in Asia.

All that has been happening against a background of persistent inflation, steadily rising interest rates, less than stellar growth forecasts for China and other major economies, and even talk of a looming recession.

Not surprisingly, these concerns have given retail investors plenty to think about. Whether their priority is to buy a home, save for school fees, or build a nest egg for retirement, investors are increasingly moving towards adopting an ultracautious approach.

With so much uncertainty around, they prefer to keep their money “under the bed”. In practice, that might mean holding cash in savings accounts or trusting in low-interest time deposits.

However, while minimising risk, history shows that such strategies are unlikely to outpace inflation. As a result, investors may fail to meet their financial targets and miss out on opportunities, when they could instead be considering resilient, low-risk options which offer consistently higher returns.

“Interest rates have come up, which might be somewhat negative for the equity market, but it actually makes some of the fixed-income products quite attractive,” Dhruv Arora, founder and chief executive of Syfe, an online investment platform licensed to operate in Hong Kong, Singapore and Australia, says.

“Today, even very safe options are giving 5-6 per cent, relatively stable [and] very low risk. So making that a part of your portfolio – anything between 20 and 40 per cent depending on your risk appetite – is [worth considering].”

That means making changes in response to market conditions and broader economic trends, rebalancing where appropriate and, ideally, having some exposure to emerging sectors and newer industries. The trap to avoid is being too concentrated, for example, in one banking stock or putting all your eggs in one basket.

“You’ve also got to be aware of the elephant in the room, which is inflation,” Arora says. “There is a possibility we’ll end up in a mild recession, but I think inflation will stick around and growth will not be great in that regard.

“Certain parts of the market are pricing that in – a stagflationary environment – where inflation will be there, but not at the same level as now.

“If interest rates come down, equity markets may get a little bit of a boost. But the ability to diversify and add money market funds or fixed-income options to your portfolio is super relevant in this environment because you are actually getting very good returns on them.”

In general, Syfe believes time in the market is more important than timing the market, whether investing a lump sum or smaller amounts on a monthly or quarterly basis.

Historical data shows this strategy works best for “passive” investors in the mass-affluent category because it allows them to ride out the peaks and troughs of market movements.

Yet while taking a systematic approach, it also makes sense to explore ways to earn higher returns on otherwise idle cash held in traditional savings accounts.

Syfe’s Cash+, which is designed to maintain a low-risk profile and high liquidity, generates dependable returns through money market funds, which invest in short-term deposits and high-quality money market investments.

There are daily accruals, no limits or lock-ups, and the digital platform offers flexibility and convenience.

“Typically, the majority of users don’t log on to their app every day,” Arora says. “Because the focus is on wealth accumulation, they might want to look at it once a month or so.”

The whole advantage of a digital platform is that it’s very scalable, while also providing easy access to relevant information and links to other investment choices, he says.

“When you build a solution for one, you can build it for 10,000. And if users have a good experience and see there’s something unique, the logical next step is that they will probably recommend it to their friends.”

Disclaimer: Information in this article is not, and should not be construed as, an offer to sell, or a solicitation of an offer to buy any security, investment product or service, nor a distribution of information for any such purpose. This article has not been reviewed by the Securities and Futures Commission of Hong Kong. The screen displays and/or the images of the website are for reference and illustration purposes only.

Cash+ is a low-risk-rated discretionary portfolio management service. It is not a savings or deposit product at a bank. Investments involve risks and Cash+ does not provide any guarantee or assurance of returns.

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