Expert: Interest in Investing in the Financial Markets Growing Swiftly

Published on

Kristaps Urpens, Head of Baltic Sales at Citadele bank’s subsidiary CBL Asset Management

Increasing numbers of clients are turning to investing in the financial markets, changing their saving habits—increasingly replacing requests for deposits and savings accounts with the creation of individual investment portfolios.

The Covid-19 virus surprised the world, and the speed of its development and uncertainty has impacted not just our daily life, but also the value of financial assets. In March, the financial market experienced one of the fastest historic downturns. Our clients had maintained a long-term perspective and acted pragmatically during such a drastic downward movement. This situation was valued as an investment opportunity. During previously experienced financial markets’ downturns, e.g. the 2008 crisis or the recent market correction in 2018 their investment portfolios not only maintained the value through the volatile markets, but have also produced additional investment portfolio return. I can see that our clients are well aware of the current situation and are willing to share their experience and knowledge with others. There has been a trend of revaluating of people’ saving habits: transitioning from low-yield savings in a saving or deposit account to delegating the creation of their investment portfolio to the CBL Asset Management team, seeking for greater yields and increasing their long-term savings potential. We are also seeing existing clients understanding the downturn caused by Covid-19 and willing to inflow additional capital to their investment portfolios. Our clients’ financial literacy serves as a proof of the successful development of investing as a savings culture in Baltics.

Is investing in the financial markets suitable for everyone?

We as a professional asset manager offer the most appropriate service to our clients, bearing in mind their risk tolerance and investment goals. The key to our success is clearly defined investment aim and our clients’ understanding of the associated risks. This helps create long-term savings, gives a feeling of comfort and security and provides result through client’s life-cycle.

To ensure the best possible outcome, investment portfolios are optimally balanced according to a certain risk / return criteria. This investment approach allows us to soften potential downfalls and gain additional benefits from a growing market. We believe that clients’ investment portfolios comprised solely from passive ETFs (Exchange-Traded Funds) without any reallocation strategy are not justified for asset managing remuneration. We do act according to financial markets and macroeconomic events, e.g. back in February, at the very beginning of the crisis, we reduced the risk in our portfolios, protecting our clients’ investments from a greater loss. Any client can create their own passively-managed portfolio themselves, but the long-term proven record of the ability to act in uncertain situations proves the professional competence of the asset manager.

There are no magic potions or crystal balls in investing - the more you want to earn, the bigger the risk you have to take. That’s why anyone who turns to investing in the financial markets has to ask themselves how much risk they are really able to take. It is our professional duty to determine correct risk appetite of our clients and provide them with real investment expectations. It serves as a foundation for an adequate reaction from their side during the critical times such as we all currently experiencing and allows us to build a successful long-term relationship.

When is the best time to start investing?

This is one of the most frequently-asked questions during increasing interest to invest in the financial markets. A Chinese saying goes that the best time to plant a tree was 20 years ago, but the second-best time is today. This is a great chance to purchase financial instruments with a discount. It is important to recognise the value of money in time and, the earlier you start, the bigger your benefit is.