OVER the years, you may have picked up a variety of investments with your hard-earned money. Like any courtship in the beginning stages of romance, or the thrill of your first home purchase, you spent a lot of time and attention deciding what and which investments to buy. You may even put in effort to monitor the investment at the initial stages.
However, after a while, you couldn’t keep up with life’s demand and you find yourself struggling to find the time and attention to review your investments, let alone manage them. After a long, hard battle (perhaps for some of you, not), you ended up holding on to one too many investments, all different in asset classes, and each registering different performance - some good, some not.
If you find yourself in that situation, it is time for you to Marie Kondo your investments.
Who is Marie Kondo, you asked? Marie Kondo is a Japanese decluttering consultant and author of several best-selling books including The Life Changing Magic of Tidying. You might have seen her on Netflix, where she is the star of Tidying Up with Marie Kondo. The TV series has since gained a massive following of fans eager to declutter, minimise and spark joy in their homes.
Of course, getting your home to look organised, compared with consolidating your investments for example, is a lot simpler (but not easy) to achieve. After all, the process to declutter your home is about identifying what physical objects are unnecessary according to list priorities. It may be tough to make decisions about each item, but you usually know what you need to do.
When it comes to making your investments resemble your stress-free financial vision, however, the process to get there is harder to understand, much less follow. You can’t help but notice the physical presence of your clothing in your wardrobe every day. Cluttered investments, however, are much less visible.
The good news is, the same strategies that can help to declutter your home can also help you declutter your investments.
> Commit to declutteringIt’s about mindset. Yes, Kondo describes how to declutter your house physically, but she says her tidying technique enables her clients to acquire the mindset needed to stay tidy forever rather than just doing a big clutter dump once a week or once a month (or once a year).
When it comes to investments, you need to have the mindset of a conscious investor, rather than a default investor. By applying the same decluttering philosophy for our homes to our wealth management, you will be able to create a stress-free financial environment. You need to have the desire to see that your investments stay relevant and performing at all times, rather than just doing a major overhaul once every few years.
After all, it is time YOU get serious with YOUR serious money.
> Imagine your ideal lifestyle.
Kondo’s clients are asked to imagine the life they want to live, and break down each wish (for example, do yoga every day) by evaluating why they desire that particular wish or intended result (to relax.) Decluttering is all about removing what is unnecessary so only the essential remains. This is an inherently personal process, because what is essential for your home and happiness is different from that of anyone else. Recognising exactly what is most valuable to you, allows you to create a home that reflects your values.
Similarly, managing your wealth starts with your values. Other than financial necessities, you need to identify the financial goals that matter most to you. What type of home is great for your family? What kind of tertiary education do you want for your kids? What type of retirement life do you want?
Ask yourself what sparks joy in your life and the type of life you want to design. It is time to place financial goals around making that life come true.
> Finish discarding first.A common mistake in decluttering is to try organising your way out of a mess. If you do this, you are destined to fail because you are allowing yourself to feel like you are making progress, when in fact, you are only trying to find space for things you don’t want to keep—while ignoring the root of the problem. “Putting things away,” Marie Kondo writes, “creates the illusion that the clutter problem has been solved.”
A similar mistake with money management is forcing a wealth management system onto your assets, without first examining those assets and purging the ones that aren’t working well for you. This has become even more common nowadays, with the countless money management apps that has been designed to report your latest financial information.
In the KonMari way, you hold each item you possess in your hands, and ask yourself if it “sparks joy.” Yes? Keep it. No? Discard it.
For wealth management, you look at each of your investments, and ask yourself if it is still relevant to the current investment environment, and if the investment is performing well compared to its peers.
For properties, ask if it is giving good rental and capital appreciation. For banking stocks, ask if it is performing better than other banking stocks in Malaysia. For Malaysia equity unit trust fund, ask if it is performing better than other Malaysia equity unit trust funds in Malaysia market. “Yes? Keep it. No? Sell it and turn it into cash.
> A home for everything
Marie Kondo highlights tidying by category, not location. Sorting through your clothes is good. But, sorting through your closet first, then your dresser, and finally the storage bins in the basement, is a fatal mistake. Tidying by category, Kondo says, prevents the confusion that arises when you try to declutter objects stored in multiple locations.
Managing your investments require a similar approach, Instead of organising them according to its providers, investments should be recognised in accordance to its asset class.
Different types of asset classes are associated with different types of risks. When you invest into different asset classes, you create a buffer to these risks and enhance your portfolio returns. One should always spread your money into cash, foreign currencies, bond, equities, properties, real estate investment trust (REITs) and commodities at different percentage quota based on your personal preference and risk appetite.
We use a strategic asset allocation statement to organise every investment owned. The key, is to diversify your investments.
Through this process, if you find that you are in possession of investments that no longer serve you, or which fits the strategic asset allocation statement, let them go. You can use the cash raised from discarding unwanted investment to buy new investments according to your strategic asset allocation. For existing investments that you have decided to keep, you may need increase or reduce their holding percentage based on the requirement of your strategic asset allocation statement.
> It is a never-ending journey
Both decluttering your home using the Marie Kondo method and good investment management requires regular review and maintenance. Neither process is a once-and-done job, as you will always have to maintain your home and your investments in the most optimal condition.
There will always be items that would require putting away from your home, and there will always be investments coming into and flowing out of your life. New investment opportunities must be captured and investments which are no longer good and relevant should flow out of your portfolio.
It’s helpful to think of it as being similar to car maintenance. Just as you must service and repair your car regularly (so that it’s safe), you need to make decluttering and checking in on your investment portfolio a regular habit.
In short, anyone who has invested their hard-earned money into some form of investments, big or small, should always strive to become a conscious investor. This means being responsible to the money that you have earned, by not recklessly investing your money and unconsciously hoarding on the wrong investments.
Instead of letting your investments make your life miserable, let them spark joy to your life.
Yap Ming Hui (email@example.com) is thrilled that his mission to empower every Malaysian with a roadmap to financial freedom has finally come to fruition with the release of a free DIY roadmap to financial freedom tool on the iWealth mobile app.
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