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Important Information
Portfolio:
The Moderate portfolio is designed for investors seeking a balanced approach that combines growth potential with a measured level of risk.
Overview
With a diversified mix of sukuk, global equities, gold, and emerging market stocks, this portfolio aims to provide steady capital appreciation while managing market volatility. With a 5 Year Annualised Return of 6.6%, it offers a middle-ground option for investors who desire both stability and growth over the long term, typically 5+ years.
Quick Facts
Asset Allocation:
Investment Strategy
The Moderate portfolio is crafted to strike a balance between stability and growth:
Growth Focus
By heavily investing in global and emerging market equities, the portfolio is poised to benefit from economic expansion and innovation across regions.
Risk-Return Trade-off
With 89% in global equities and an additional 10% in emerging markets, the portfolio embraces market volatility, which is a necessary trade-off for aiming at higher long-term returns.
Comparative Positioning
Compared to more conservative portfolios that feature sukuk or physical gold to temper risk, this portfolio skips those elements entirely (except for a minimal cash holding) to focus entirely on growth resulting in increased risk due to lack of asset class diversification.
Equity Focus
With nearly 70% of the portfolio invested in global stocks, the strategy centres on tapping into growth across developed markets.
Balanced Exposure
The inclusion of sukuk (15%) offers a stabilising effect, as these instruments generally present lower volatility compared to equities.
Diversification
Emerging market stocks (8.25%) add an extra layer of growth potential by capitalising on dynamic economies, while a dedicated allocation to physical gold (6.5%) provides further diversification and a hedge against market uncertainties.
Comparative Positioning
Unlike the Very Aggressive portfolio that forgoes sukuk and gold for maximum growth exposure, the Aggressive portfolio blends growth with elements of risk mitigation, appealing to investors looking for a measured high-growth option.
Equity Exposure
With nearly half of the portfolio (49.25%) dedicated to global stocks, it aims to capture growth from developed markets.
Risk Mitigation
A significant allocation to sukuk (35%) and physical gold (8.75%) helps buffer against market downturns, providing stability during volatile periods.
Emerging Market Potential
The 6% allocation to emerging market stocks introduces an element of high-growth opportunity, albeit with increased risk.
Comparative Positioning
This portfolio sits between the Aggressive and Moderately Conservative options, offering a middle ground for investors who desire exposure to growth markets without completely sacrificing stability.
Balanced Core
A 50% allocation to sukuk provides a stable foundation with predictable income and lower volatility.
Growth Through Equities
Global stocks make up 37.50% of the portfolio, offering exposure to developed markets with the potential for capital appreciation.
Diversification
A 6.75% allocation to gold which has historically performed as a hedge against market uncertainty, while a 4.75% exposure to emerging market stocks adds a dynamic growth element. As always, it’s important to note diversification reduces but does not eliminate risk.
Comparative Positioning
Positioned between more conservative and aggressive portfolios, the Moderate portfolio is designed for investors who seek a middle path – capturing growth opportunities while maintaining a level of risk control.
Stable Core
With 65% of the portfolio allocated to sukuk, the core of the strategy is focused on fixed income-like instruments that offer predictable returns and lower volatility.
Measured Equity Exposure
Global stocks comprise 29.75% of the portfolio, offering exposure to international markets and the potential for capital appreciation while keeping overall risk in check.
Diversification
A 4% allocation to gold adds an extra layer of diversification, acting as a hedge against economic uncertainty, while a small slice (3.25%) in emerging market stocks provides a modest growth boost.
Comparative Positioning
This portfolio is designed for investors who prefer a cautious approach compared to more aggressive alternatives, striking a balance between capital preservation and moderate growth.
Primary Focus on Sukuk
With 99% of the portfolio invested in sukuk, the strategy capitalises on fixed-income instruments that offer regular income and lower volatility compared to equities.
Cash Reserve
A small allocation to cash (1%) ensures liquidity for short-term needs, without significantly impacting overall stability.
Comparative Positioning
Unlike more growth-focused portfolios that include equities and gold, the Very Conservative option is designed to protect capital, making it suitable for investors who prioritise risk minimisation over higher returns.
Volatility & Risk
Understanding the risks associated with the Moderate portfolio is essential:
Equity Exposure
Since the portfolio is predominantly invested in global and emerging market equities, it is more susceptible to significant market swings.
Market Cycles
Stock markets go through cycles of growth and contraction. These cycles can be amplified due to economic, political, or currency-related factors.
Long-Term Perspective
While volatility can be unsettling, especially during market downturns, investing in equities has historically delivered higher returns over the long run.
Risk-Return Trade-Off
Higher volatility typically indicates greater risk, but it also presents the potential for higher returns. This portfolio is best suited for investors who are comfortable riding out market ups and downs for the prospect of significant capital growth.
Market Fluctuations
Global equities and emerging market stocks are subject to market swings. Investors should expect periodic fluctuations in portfolio value.
Sukuk and Gold Cushion
The inclusion of sukuk and physical gold helps temper volatility, providing some stabilising influence during turbulent market periods.
Risk-Return Trade-Off
The portfolio’s design embraces the idea that higher potential returns come with higher risk, making it suitable for those who can tolerate market volatility in exchange for long-term capital growth.
Market Swings
The equity-heavy component means that market fluctuations are inherent. Global stocks and emerging market investments can experience notable ups and downs.
Stabilising Elements
The inclusion of 35% sukuk and 8.75% physical gold acts as a buffer, reducing the overall portfolio volatility and providing a safeguard during turbulent market conditions.
Balanced Risk
While the portfolio is designed to benefit from growth trends, it also accepts the short-term fluctuations that come with equity investments, making it suitable for investors with a moderately aggressive tolerance for risk.
Measured Exposure
With half of the portfolio in sukuk, the core risk is kept in check by investments known for their stability and lower volatility.
Equity and Market Risk
The 37.50% allocation to global equities does introduce market risk, with values subject to fluctuations based on economic and market conditions.
Diversification Benefits
The inclusion of gold and emerging market stocks helps spread risk across various asset classes, offering a buffer during periods of market uncertainty.
Risk-Return Trade-Off
While some volatility is inherent due to the equity exposure, the portfolio’s diversified structure aims to moderate these swings, balancing risk with the potential for steady, long-term returns.
Lower Volatility
The heavy allocation to sukuk significantly reduces exposure to the market swings typical of equity-heavy portfolios, thereby enhancing stability.
Equity and Market Exposure
Although there is an allocation to global and emerging market stocks, these components are kept at a level that offers growth potential without overwhelming the portfolio's stability.
Diversification Benefits
The inclusion of gold serves as a counterbalance during periods of economic uncertainty, further dampening the effects of market volatility. It is important to note that diversification does not completely eliminate all risk.
Risk-Return Balance
This portfolio is structured to minimise risk while still providing opportunities for incremental growth, making it well-suited for those who are more cautious about market fluctuations.
Low Exposure to Equities
By excluding global stocks and other high-growth assets, the portfolio avoids the significant market swings typically associated with equity investments.
Stable Sukuk Investments
Sukuk, which are comparable to bonds but structured to be Shariah-compliant, provide a more stable income stream with less volatility. But sukuk are lower risk, they are not completely risk-free.
Minimal Cash Impact
The 1% cash holding helps maintain liquidity with minimal drag on overall returns.
Trade-Off
The reduced volatility comes at the cost of lower potential returns, which is a conscious choice for investors who value stability over rapid capital growth.
Investor Suitability
Ideal For:
Balanced Investors: Those who seek a blend of capital growth and income with a moderate tolerance for market fluctuations.
Long-Term Planners: Investors with a time horizon of 10+ years who can endure short-term volatility in exchange for steady long-term gains.
Risk-Conscious Investors: Individuals who desire growth but prefer a diversified, risk-managed portfolio that tempers the inherent volatility of equities.
Not Suitable For:
Highly Conservative Investors: Those who prioritise capital preservation above all else may find the equity exposure too risky.
Shorter Time Horizon: Those who require their funds or expect consistent returns within 5 years.
Aggressive Growth Seekers: Investors expecting high returns from a predominantly equity-driven portfolio might find the moderate allocation insufficient for their appetite.
Frequently Asked Questions
