New Saudi Sovereign Wealth Fund

A new Saudi sovereign wealth fund (SWF), Sanabil Al Saudia, commenced operations last week. Gulf SWFs have recently initiated significant changes in their investment strategy. They have shifted away from investing in Western markets, particularly the financial sector, and started to invest in local businesses and banks. Furthermore, they have decreased the dollar ratio in their investment portfolio and started to improve their transparency as a response to the global anxiety over their investment goals. How will this affect my portfolio in the medium term?

Seven Principles to Consider

1.Accept That Uncertainty is the Rule,Not the Exception

When building long-term wealth, periods of uncertainty are the rule, not the exception. However, despite such uncertainty, it is imperative to bear in mind that the long-term progress of the stock market has been upward.

2.Focus on What is Important and Knowable

Since uncertainty is the rule not the exception, it is crucial to focus on what is important and knowable versus important and unknowable. Such an investment approach can help uncover investment opportunities during many different market, economic and political environments.

3.Patience is a virtue.

A patient, buy and hold investment approach is the best way to build long-term wealth. Such an approach allows investors to filter out the noise, maintain their investment strategy and allow the power of compounding to help build wealth.

4.Expect Periods of Disappointment

It is crucial to understand that even top performing investment managers will go through periods of disappointment. By recognizing this fact, you may be less likely to engage in unhealthy investor behaviour and make unnecessary modifications to your long-term investment strategy.

5.Engage in Healthy Investor

Having conviction in the investment managers you entrust your capital to and working with a financial professional can help investors engage in healthy investor behavior.
6.Have an Investment Strategy

Investing is an emotional experience, so develop a “roadmap” to maintain your focus and discipline necessary to build long-term wealth.

7.Set Realistic Return Expectations.

Stocks have historically been the best per-forming asset class for growth of capital over the long term. When planning long-term financial goals, it is important to be a realist,and not an optimist or a pessimist.