DFO Reflections — Q4 2021

2021 was the year for which we expected victory over Covid, as it seemed that successful vaccination programs could defeat the pandemic. However, as the year progressed, it became clear that new virus variants and sluggish vaccination campaigns would prolong the crisis. This led to a ‚stop and go‘ economy in most countries in the second half of the year, after the ‚logjam‘ of 2020 and the most pressing supply issues seemed to have dissipated in Spring.

Soon, there was a realisation that rising prices would probably not be temporary, but could last for a couple of years. Rising prices usually require central banks to adjust monetary policy, typically reducing money supply and/or raising interest rates. Rising inte- rest rates, in turn, are poison for financial markets. Despite those new developments, both the 4th quarter and the full year 2021 produced very good investment returns for our clients.

It makes us very happy to see, that our concept of FairHorizons as template for successful portfolio construction works very well, and significantly contributed to the good results. Ongoing uncer- tainty and rising prices could be countered with the appropriate combination of investment grade bonds and global equities.

Even though 2021 was the worst year for investment grade bonds since 2013 and produced losses for most of our safety investment building blocks, the very good results in global equity markets were able to provide a significant offset.

Even portfolios composed mainly of investment grade bonds were able to generate returns of more than 2 % by only adding 20 % of globally diversified equity investments, thus largely compensating for inflation.

The big winners of 2021 were U.S. and Indian equities with returns between 20 and 30 %. The big losers were Chinese equities with losses easily exceeding 20 to 30 % in certain sectors. In our more than 30 years of stock market experience, we have never seen such a divergence in performance between U.S. and Chinese equities, especially in light of the fact that broadly diversified American and Chinese stock market indices have achieved similar annual returns of between 9 and 10 % p. a. over the past 20 years. Contrary to previous years, European equities also had a very good year.

Das Family Office relies on a proven and diversified investment approach through specially designed FairHorizons, an investment template which embodies portfolio solutions which are adapting to the respective investment time horizon and cash flow needs of an investor: the longer the investment time horizon of an in- vestor, the higher the advised risk share (equity share) should be. Conversely, risk should be avoided if short-term expenses are expected.

As an independent advisor, we’re the sole agent of our clients and have no business affiliation with any product or service provider, to avoid any form of conflicts of interests. We believe in investor education and do not receive any commissions or hidden fees from fund houses or other financial service providers. If you have not yet become aware of Das Family Office, we would like to en- courage you to reach out to us ([email protected] – www.dfo.sg).

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