To deal with rising inflation and global economic uncertainty, keep at least 30 percent of your investment portfolio in cash, an executive of Cathay Life, the nation's largest insurance company, advised yesterday.
"Cash is king. It is wiser to keep away from risks and uncertainties than to put your money in markets that are likely to decline by 10 percent to 20 percent this year," said Andrew Liu (劉上旗), who is both senior vice president of Cathay Life Insurance Group(國泰人壽) and chairman of the group's securities investment consulting firm.
He warned investors against possible stagflation in the US that could have a contagion effect on the global economy during a personal wealth management seminar yesterday.
"We are conservative on the prospects for the investment environment in 2008," Liu said. "A slowdown in growth, or possibly a recession in the US economy, in the midst of sky-rocketing energy prices would put the Federal Reserves in a dilemma."
Liu recommended Japan and Taiwan as two equities markets that were a safe bet for people who still had the appetite for higher risks and returns than can be had from time deposits.
"These two underperformers may fair better than others because of a relatively low base," Liu said.
Besides predicting an influx of cash fleeing from retreating markets, Liu was also hoping for an improvement in Taiwan-China relations following the presidential elections in March to lift the market out of the doldrums,.
Taiwan's TAIEX rose 8.72 percent last year, while Japan's Nikkei 225 fell 11 percent.
Although emerging markets and mutual funds investing in natural resources and commodities were still the top choices for long-term investment, Liu said investors who are planning to invest in those markets should beware of risks and volatilities in the short term.