Hark the goldbug sings, Investing in infrastructure funds

A friend of a friend has suggested I invest in gold. I have 200,000 baht for investment. Should I put it all in gold? What's the difference between gold bullion and gold futures and their return rates? Thanks for your advice.

_ PekANSWERED BY...Teera Phutrakul, CFP, Chairman, TFPA It always amazes me where people get their investment advice. Receiving investment tips from friends and relatives is bad enough, but to act on advice from "a friend of a friend" is really pushing the limit. The short answer to your question is no, I would not put all your eggs in one basket. Although it is true that central banks around the world are printing money like there is no tomorrow, with sovereign government debts and deficits threatening entire economies and currency regimes, diversification is key.

Basically, diversification among various asset classes works by spreading your investments among stocks, bonds, cash, real estate, and commodities, all with low correlation to each other. This allows you to reduce volatility in your portfolio because the different assets move up and down at different times and at different rates. This type of portfolio creates more consistency and improves overall performance.

Gold is part of the commodities asset class; it is also a reserve asset, an alternative currency, and a store of value. Depending on your personal circumstances, having about 10-20% of your overall portfolio in commodities is the norm.

As for beginners, I would not bother with gold bullion (physical gold bars) unless you have a big safe at home. The word "bullion" means a refined and stamped weight of precious metal. Gold bullion bars weigh approximately 400 troy ounces, refined and cast by various private refiners worldwide, and accepted for "delivery" into London and other major gold bullion markets.

Gold futures are agreements or contracts to buy and sell quantities of gold on a particular date in the future at a fixed price. These contracts also trade on futures exchanges. Personally, I prefer to invest in gold via exchange-traded funds (ETFs). They are low-cost, transparent, liquid and widely traded on major stock exchanges.

This news story, www.bangkokpost.com/news/local/315692/pm...-infrastructure-plan, refers to government infrastructure investment plans. Do you know of a fund that will benefit from these investments, i.e. cement and steel, road machinery, etc.? If I wanted to invest in infrastructure outlays, where would be the best place? Thanks.

_ KelvinANSWERED BY...Teera Phutrakul, CFP, Chairman, TFPA Infrastructure investments cover a wide spectrum of projects from economic infrastructure such as transport, energy, and utilities to social projects such as hospitals, and involve various forms of financing such as debt vs equity, private vs listed, direct vs indirect, etc. Therefore, you need to approach this asset class with your eyes wide open.

Previous infrastructure projects, namely the skytrain, Don Muang Tollway, etc, were not exactly risk-free and early investors lost their shirts due to several reasons: cost overruns, construction delays, political meddling, just to name a few.

However, given the long-term growth potential and low-correlation aspects of infrastructure investments, more investors are interested in increasing their exposure to this asset class.

Private financing of infrastructure is not new. In the past, most infrastructure projects were state-owned, but since the 1980s the trend has changed with many being partially or fully privatised, in conjunction with several industries being deregulated.

Different countries have taken different routes at different speeds, with governments increasingly proposing new forms of public private partnerships (PPP), i.e. by subcontracting public services to private companies, whereby the state changes its role from owner and provider of public services to purchaser and regulator of them, with the private sector as financier and manager of these projects.

In Thailand, the SEC recently approved the creation of dedicated mutual funds investing directly or indirectly in infrastructure projects. In addition, a fund can invest in a greenfield project if it meets SEC conditions, such as number of unitholders and listing requirements.

Prospective investors in infrastructure funds should understand that these projects are long-term in nature. Therefore, the usual investment recommendations still apply: portfolio diversification, investing for the long term and dollar cost averaging.

The Thai Financial Planners Association is the certified financial planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted to them through wealthcare@bangkokpost.co.th or posted at TFPA's webboard at www.tfpa.or.th

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Writer: Thai Financial Planners Association