Managing your money through uncertainties

WHEN there are political uncertainties, it is a given for people to be worried about money and their investments.

This is because uncertainty has a severe impact on economic conditions. It erodes investor confidence and causes short-term nervousness.

Stability is key for any country and its people.

In uncertain times, our minds can be engulfed with negativity. Some lose sleep as they worry about the future. Others take drastic steps to cut their losses as fear of losing all can be too overpowering.

Thank goodness all has turned out well. Malaysia now has a new prime minister and the mere announcement of his appointment sent the stock market roaring and the ringgit is beginning to strengthen.

“It is normal to be so worried when there is political uncertainty and the slide in the ringgit did not help either. We were gripped by fear and that cluttered our mind,” said Wong (not his real name).

He said it is easy to say “keep calm and wait for the storm to blow over,” but in reality, it is tough.

In uncertain times, should we be making changes to our investment strategy?

“The political uncertainty will pass quite quickly. As such, the selldown in Malaysian equities we saw in the immediate aftermath of the 15th General Election or GE15 provided an opportunity to buy low.

“Remember that regardless of what field of economic endeavour we are involved in, the way to make money is to buy low and sell high,” Manulife Investment Management (M) Bhd licensed financial planner Rajen Devadason said.

He added that “courage to invest in falling markets and patience to wait until recovery occurs are profitable virtues that reward long-term investors”.

The one thing that investors need to do is research. Do your own research as that gives you a better foundation for making informed decisions even in a crisis.

This also ensures that you are investing in fundamentally strong companies that can often ride the tide.

Financial stress during such periods can certainly wear you down. A report said it can negatively affect you emotionally and physically.

The best thing to do during uncertain times is to stick to your financial goals. These are essential. Another report added, “It will shape which investments are suitable for you and what objectives you should focus on achieving.”

Still, would it be wise to exclude political preferences from investment decisions? Devadason said “no”.

“Such considerations affect not only investors in Malaysia but also the large institutions that control trillions of US dollars and have the entire world to invest in.

“If we end up with wise leaders who focus on economic strengthening, Malaysia will slowly come back to life and start to shine.

“If we don’t, we’ll continue the slide (and) that has been going on for several years. Countries rise and fall on the quality of leadership,’’ he added.

He said that if a sound government that focused on economic improvements was put in place, then our ringgit would strengthen.

Even if you have no exposure to any kind of investment, there are still opportunities in uncertain times. Devadason said the first thing to do is to set up a written budget to optimise a regular monthly cash flow surplus.

Secondly, allocate that surplus toward paying down existing debt and building savings and the initial focus of those cash savings will be to build an adequate emergency buffer fund or EBF of three to six months’ of expenses for employees and six to 12 months for business people.

After that, careful investing should begin.

“A great way to construct a risk-reward optimised, well-diversified portfolio is to not focus solely on investing,’’ he said.

But opt to build up a prudent savings and investment portfolio that is spread across three, four or five asset classes selected from cash, fixed income, equities, investment real estate and alternative investments like commodities, he added.

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Manulife , Rajen Devadason , politics , investment


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