From a broader international perspective, it is not only Turkey where the investment environment has more risks than 10 years ago, because the same increases in risk are happening everywhere internationally, and no where is safe.
For example, a cash deposit in a bank anywhere in the world is no longer the reliable ‘risk free’ solution of just a few years ago. The reasons are two. The first, is that the purchasing power of cash is declining central banks have created more new money in the three months after the health pandemic in early 2020, than created in the years following the financial crisis of 2008. The result is that cash buys less. The second reason, now established by the EU after the Cyprus credit crisis, is that bank deposits are no longer 100% guaranteed in case of bank failure. Instead, depositors may lose a portion of their cash because their claim rights have been placed second behind other bank stakeholders. These risks now require investors’ attention everywhere in the world, not just in Turkey.
Protecting capital and preserving wealth requires focus on managing risks. This may be an unfashionable concept, because salesmen know they earn more by promoting profit potential…. Investors know risk management comes first, because without it, the profit potential will never come to be.
Manage Risks and Protect Capital
Risk Management is a specialist discipline and requires a formal approach that is different than investment management. Requiring principles embedded in the oversight of policies, practices and procedures applied for protection of investors’ capital wealth.
Protecting capital wealth can only be done with professional guidance. Undertaken on a Wakalah basis, the formal approach applied by the Advisors at mytapu.com includes a broad and deep understanding of the Turkish circumstance of the last 40 years, within the greater historical, economic, geopolitical, and cultural context.
A formal approach works successfully because it is based on continuous analysis, assessment, diligence, & preparation, with economic forecasting to avoid losses and capture gains.
The structure should be determined by using standard risk management principles including diversification, and full due diligence applicable to the specific situations in Turkey. Using a defensive structure and defensive asset mix is the key. Continuous vigilance and monitoring contributes to near complete 360% risk protection….
Minimising the risks related to the capital investment in Turkey can thus be managed to achieve a solution that is similar to investing anywhere in the world.
Financial Assets are the Least Costly Choice for Turkey’s CBI / CIP
Choosing to allocate capital to financial assets has many advantages for risk management, capital protection, and investment performance returns. Including more cost efficient implementation, greater flexibility, more choice, etc. The investment threshold is higher at $500,000 but the cost of making the investment is far lower, at less than 3-4%, compared to residential real estate at 10-20%.
The great advantage of investing in financial assets instead of real estate, is the greater flexibility and greater choice of tools for managing risk. The choice of investment assets should be determined using risk correlations of specific asset classes in Turkey, applied to the three financial asset types permitted by Turkey’s CIP / CBI Program:
Venture Capital Funds
No Turkish Lira Exchange Rate Risks
The $ 500,000 investment requirement may be met without any investment in Turkish Lira and no TL exchange rate risk. A Professional Advisor using economic analysis and due diligence can minimise risks by designing an asset mix with suitable risk correlations. For example, the asset mix may include foreign currencies, fixed income bonds, gold, and a wider range of potentially better performing assets, via venture capital funds, that may include high technology, film production exports, etc.
Protecting the Purchasing Power of Capital
The resulting outcome is an asset value performance that minimizes the risks and minimises large changes to the capital value that are visible daily in asset prices due to international economic volatility. This can be achieved by matching and offsetting risk correlations against each other so that the overall outcome is protecting the purchasing power of the capital. This ensures large losses are avoided, thus achieving the number one rule of wealth preservation.