Regardless of the approach taken, today’s family office needs to manage risk by creating diversity within their portfolio which would otherwise be provided by a third party manager.
One of the questions we are asked by investors relates to the risk in purchasing an interest in or financing an exciting early stage or start up venture. Minimizing risk is tricky if you choose to invest anything. Most family offices and wealthy individuals know the relationship between greater risks and higher returns. Diversification is one method that can balance risk in a portfolio.
Alternative investment diversification can be created through a number of methods. Some investors attempt this themselves but increasingly seek the services of a professional independent advisor to assist them.
Diversification is the division of your investment portfolio among varied assets. It can assist risk reduction because different investments rise, plateau or reduce independently. In a well structured portfolio of direct investments, diversified asset combinations typically cancel out each others fluctuation, therefore reducing risk.
Family Offices can diversify within a specific asset category such as medical technology or manufacturing. To do this you could acquire interests in companies in different geographic locations. Or you can diversify your portfolio across different asset categories (eCommerce, medical technology, defense technology or automotive development for example). Or you can diversify in ventures that are spread out in timing on the development “curve”.
Clearly for your diversification strategy to be effective, improved performance while reducing risks is ideal. Typically we view two broad risk types when analysing alternative investments. These are known as unsystematic risk and systematic risk. Part of our job is to assist our inner circle clients identify and subsequently reduce these risks.
Unsystematic risk is sometimes referred to as diversifiable risk and is specific to a particular investment. It may be that an opportunity shows weakness in one or more particular areas after we have run our due diligence. Our obvious goal is to mitigate those factors and provide a sensible balance of risk versus reward profile. We cannot always remove the risk, we can however reduce it and spread the likelihood of such risks at any one time or alter the price of the risk on your behalf.
Systematic risk effects everyone at the same time and accounts for most risk most of the time. Examples such as 9/11, the collapse of the financial markets in 2008 and impending war in the Middle East affected economies, not just a business sector or industry. Investors cannot eliminate such risk as it is beyond their control, as such it is un-diversifiable risk.
‘Diversification across ‘asset classes’ or different investment sectors and markets helps reduce your risk by cushioning market tremors and removing most unsystematic risk from your portfolio. You should get rewarded appropriately for taking market risk. We can reduce portfolio risk by excluding un-systematic risk that investors are not rewarded for.
Diversification averages out asset returns within your alternative investment portfolio, it smooths potential ups and downs and it provides good protection against business risk, financial risk and volatility.
Forecasting the weather has many similarities to investing in the stock market. How many times has the weather changed and the forecast wasn’t even close? Then again how many times has a stock gone up or down when you never expected it to move like it did?
I’ve looked at a winter forecast for 6 inches of snow to drop overnight only to wake up in the morning to a clean deck and nary a drop of snow. Then again I’ve gone to bed having read online that we might get snow in a week or so only to discover our deck and yard buried with eighteen inches of snow.
How is the weather forecast similar to investing? Actually more than you might think. Let me explain.
If you get a tip from a friend on what to buy or when to sell, you should ask yourself: is this tip more reliable that the weatherman? What is the track record of the tip source?
Even if you use investment software the recommendations can be extremely accurate or not. The accuracy depends upon a number of factors:
Does the recommendation require your interpretation?
Is the recommendation based on one buy/sell rule or does it take into account a number of factors?
Is the recommendation based on a back-tested strategy?
In other words if you want to manage your account with more accuracy that the weather forecast your source of information for making the recommendation needs to be proven.
Looking at just one chart may tell you a mutual fund is moving upwards but does it tell you that compared to other mutual funds it is the best of the bunch?
If your recommendation to buy or sell is based on many factors there is a greater chance it will be more accurate and less likely for you to lose when it starts to head down.
The best way to tell if a set of buy/sell rules is going to make you money is to back-test them. Consider them as a strategy or model for making your decisions.
Ideally you should take the back-test a step further and have your investment software program test all your buy/sell rules in different combinations to find the best set of rules that meet your objective. Your objectives may be based on how much money you make – the gains. But they could also be based upon how low the losses are or how frequently you need to make a trade.
The key factor is that you want your investing to be better than the weatherman. You want to develop proven strategies that are going to give you best return for your own personal goals and desires. You can do this with optimized back-testing to find the strategies you desire.
A favorite and a major foreign investment destination especially in the real-estate market, Mombasa hosts substantial number of foreigners from Asia, Europe, United States and even from Australia. So, where in Mombasa do these expatriates or foreigners live?
Mombasa has established its name as a cultural port town that has been able to withstand numerous invasions and occupations by foreigners from overseas countries. The city’s diverse tourist attractions include coral reefs and islands, sandy beaches, historical monuments, variety of wildlife and conducive tropical climate, which have attracted both local and foreign investors in various sectors of the economy.
Mombasa’s Little Europe, Mtwapa
If you want to go to Europe, you do not need to spend a fortune doing so. Simply take a ride to Mtwapa, situated less than 16km north east of the city.
An old, vibrant and busy town, Mtwapa comfortably operates on a 24-hour economy and it is the fastest growing real estate-market in Mombasa.
Originally occupied by native community, Mtwapa obtained its name from the locals who referred to themselves as “mtu wa hapa” meaning “someone from here” with the aim of segregating outsiders. This is no longer the case given that Mtwapa has become a confluence of local and international cultures.
Mtwapa is popularly known as Little Europe owing to the significant number of Italians, Germans and Britons who have literally kicked out the natives (who can no longer afford the rising cost of living in the town).
Mtwapa is proving an ideal investment location especially in the property market with an acre of land costing between Ksh16 million – 18million
Mtwapa has it all, from modern entertainment spots, 4-5 start hotels, complex buildings and wildlife sanctuaries to archeological relics, a beach, religious buildings and thoroughfare to the Indian Ocean, which make for good returns on investments.
Mtwapa has not gone unscathed with the locals lamenting the erosion of social and cultural ideals as prostitution, gay affairs and stripper clubs becomes a norm in the town.
Mombasa’s Asian/Arab Town
Asians and Arabs have occupied Mombasa city since pre-modern times when they came to the city to trade their goods and services for gold, ivory and spices. Many of them opted to reside in the port town becoming part of the city.
Old Town, situated southeast of the island, is Mombasa’s Asian/Arab town hosting majority of people with Asian and Arab origins.
The residence of Asians and Arabs here can be understood since the area has numerous structures, street arrays and building designs, architecture and character that is distinctly Asian and Arabic and they would naturally feel at home away from home.
Interestingly, there are several temples and mosques here to meet the population’s religious needs
Mombasa’s Town Of The Wealthy
Predominantly occupied by well-to-do foreigners and the “who’s who” in Mombasa’s social and business circles (celebrities, businessmen and politicians), Nyali is the city’s town of the wealthy.
Located less than 20 minutes north of the city center, Nyali has the best in terms of infrastructure.
Sloping into the Indian Ocean and home to numerous high-end resorts and hotels, such as Sarova White & Sands and Intercontiental Hotel, etc., residential villas and commercial facilities, Nyali is perhaps the most costly place to live and even to invest within the city
Most foreign expatriates working for multinational companies operating in Mombasa reside in Nyali, which helps in enhancing the economic performance and progress of the estate.
Nyali has the best movie theaters such as the Nyali Cinemax, shopping malls such as City Mall, eateries such as Galitos and coffee houses (such as Java and Dormans).
Are you willing to invest in a more long-term and reliable organic traffic source for your website? Then let’s look at a search engine that can assist you in increasing your traffic.
Interview an Influencer or Get Interviewed by a High-traffic Website
Have you heard of Tim Ferriss, the author of the Four-Hour Work Week?
His podcast is nowadays a staple content type that he provides to his viewers. Tim’s show has world-class performers who share their insights on a variety of topics, and he is well-liked on social media. Do Tim’s fans enjoy the show? So far, the show has received over 50 million downloads. On most days, it’s the most popular business podcast on iTunes.
Interviews, whether on video or audio, are inherently conversational, lively, and engaging. The great aspect is that it’s a win-win situation for both sides. The interviewer is exposed to a new audience, while the interviewee is able to provide his website visitors with new fascinating and authoritative information. You can ask an industry influencer to share your interview with their followers on social media if you interview them. Consider the organic traffic you’ll get from their social media followers, which number in the hundreds of thousands. Consider the level of interest generated by a prior Derek Sivers interview on the Tim Ferriss Show. Derek shared the show’s URL with his 283K followers on Twitter. It won’t hurt if you establish a relationship with the influencer as a result of the interview.
Similarly, being interviewed by a high-ranking website can result in a significant increase in search engine traffic. Harsh Agrawal’s blog, Shoutmeloud, received 35,000+ views in a single day after he was profiled by YourStory. That was the blog’s most popular search engine traffic source (with 600,000+ monthly visitors). Because interviews provide consolidated value, they can be used as a long-term lead generating source for your company. Consider how many bloggers you’ve learned about through interviews on YouTube and other high-authority websites.
You may also conduct a Reddit AMA if you have a very compelling storey to tell. Mateen’s AMA got about generating $85,000 in profit by selling TeeSpring shirts/hoodies received 2000 page views. He also boosted the number of visitors to his website on a daily basis.
By registering as a source with HARO, you can also answer queries from journalists. On HARO, Christopher from Snappa came across this question from Inc Magazine about the future of content marketing. He swiftly responded with a thorough response. He was mentioned in Inc a few weeks later as a result of this. HARO is an excellent strategy to have your brand mentioned on authoritative news sites such as Entrepreneur and Inc. Those backlinks will enhance your search engine traffic and increase your marketing strategy by improving your reputation in Google’s eyes. Contact an SEO agency to find out how you can do this and how they can manage it for you while you work on the bottom line of your business.