(Taken of the Personal Money Magazine, Malaysia edition -January 2009)
By Robert Foo
The question I am asked often these days is,"So, with this world financial crisis, what would you advise me to do?"
Tha advice depends on each person's circumstances and financial and life objectives. But here are some guidelines:
1. Check that your long-term savings plan is still on track
A savings plan is crucial to achieving your financial objectives and life goals. Downturns usually mean more retrenchments, salary/income cuts, reductions in business volume, and so on. These affect your income and ability to sustain savings over the long term. Consider alternative or multiple-income sources to reduce severe shocks to your long term income situation.
2. Stick to your long-term investment plan
There will always be occurences such as the US subprime, and credit crisis, SARS, dotcom bust, the Asian financial crisis and the Sept 11 terrorist atacks that causes change to your long term plan.
We always advise clients to ride the long term growth curve rather then the very exciting and short term curves. Although they can give good returns, the return probability is much lower and unacceptable to most individuals. Didn't we wish we put more money into the equity market when the KLCI was at about 300 points during the Asian financial crisis?
In the long term, all markets go up, but we are now seeing another short -term fluctuation. Expect more volatility as markets will be closely linked to globalisation, but stick to your long term plan.
3.Dont put all your eggs into one basket
Diversify diversify, diversify: This very common wisdom is often ignored by investors during periods of market euphoria. Remember the hype over the commodities, China, Vietnam, BRIC(Brazil, Russia, India , China), global infrastructure and other thematic funds?
Many of these funds fell by more than 30% in their first year.
many investors have over-exposed themselves to equity, prompted by the exceptional returns in 2007. Reality struck last year.
So diversify. Place sufficient money in other markets, consider alternative asset classes that are not closely correlated with the usual equity/fixed income markets. Although many equity funds have fallen in value, there are still funds that performed last year, be selective. Don't just invest in one or two funds. Build a portfolio that fit your investment needs and profile.
4. If necessary, get professional help
Buying investment products is extremely easy. Knowing the right way to invest is something else.
5.Do not be too affected by sensational news
There is hardly any positive news in the media at this time. The daily talking heads on CNBC and CNN are not going to help you much as most of the news is about what's been happening in the last few weeks or days. Rarely do they provide you with long term views because they are not as sensational and exciting as current news. So do not react to short term information and fluctuations.
**********************************************
By Robert Foo
The question I am asked often these days is,"So, with this world financial crisis, what would you advise me to do?"
Tha advice depends on each person's circumstances and financial and life objectives. But here are some guidelines:
1. Check that your long-term savings plan is still on track
A savings plan is crucial to achieving your financial objectives and life goals. Downturns usually mean more retrenchments, salary/income cuts, reductions in business volume, and so on. These affect your income and ability to sustain savings over the long term. Consider alternative or multiple-income sources to reduce severe shocks to your long term income situation.
2. Stick to your long-term investment plan
There will always be occurences such as the US subprime, and credit crisis, SARS, dotcom bust, the Asian financial crisis and the Sept 11 terrorist atacks that causes change to your long term plan.
We always advise clients to ride the long term growth curve rather then the very exciting and short term curves. Although they can give good returns, the return probability is much lower and unacceptable to most individuals. Didn't we wish we put more money into the equity market when the KLCI was at about 300 points during the Asian financial crisis?
In the long term, all markets go up, but we are now seeing another short -term fluctuation. Expect more volatility as markets will be closely linked to globalisation, but stick to your long term plan.
3.Dont put all your eggs into one basket
Diversify diversify, diversify: This very common wisdom is often ignored by investors during periods of market euphoria. Remember the hype over the commodities, China, Vietnam, BRIC(Brazil, Russia, India , China), global infrastructure and other thematic funds?
Many of these funds fell by more than 30% in their first year.
many investors have over-exposed themselves to equity, prompted by the exceptional returns in 2007. Reality struck last year.
So diversify. Place sufficient money in other markets, consider alternative asset classes that are not closely correlated with the usual equity/fixed income markets. Although many equity funds have fallen in value, there are still funds that performed last year, be selective. Don't just invest in one or two funds. Build a portfolio that fit your investment needs and profile.
4. If necessary, get professional help
Buying investment products is extremely easy. Knowing the right way to invest is something else.
5.Do not be too affected by sensational news
There is hardly any positive news in the media at this time. The daily talking heads on CNBC and CNN are not going to help you much as most of the news is about what's been happening in the last few weeks or days. Rarely do they provide you with long term views because they are not as sensational and exciting as current news. So do not react to short term information and fluctuations.
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