Covid-19 was the trigger (or, some may say, the excuse) for a global economic and market downturn. It has indeed changed the way people work, travel and invest.
The level of debt in the world has hit an all-time high of $253 trillion, interest rates are increasingly lower, cuts with negative rates are becoming common and the income gap between M40 and T20 is widening. Even oil futures prices turned negative for the first time in history.
With all this happening in the world of finance, it is important to be in the know as it gives us a picture of what is to come.
Know yourself
Investing is still a personal journey that requires your investments, goals and resources to be aligned.
It’s always important to start with the end in mind, as it is easy to get distracted and make major mistakes while chasing the latest hottest thing.
Here are some questions to ask yourself:
- What am I investing for? Am I going deeper beyond a generic outlook of just making money?
- What stage of life am I in? Am I looking towards retirement or in between?
- What investment experiences do I have from my past?
- What sort of investment risk or potential losses can I psychologically withstand?
- What do I not know about investing?
If you’re new to investing, it may make sense to focus on one or two new types of investments as you start learning and make sure you know what you’re doing.
If you have little time or interest in active investing, more passive investments may be better suited for you.
If you don’t have a large sum to invest, you may want to look at investment options that allow you to start from smaller amounts of RM1,000 or less.
If you have a large sum to invest, you may want to ease into the market with the current volatility in markets and economies.
If you’re retired or near retiring, you may want to look at lowering your overall investment portfolio risks (or reversely, increasing your exposure to higher risk investments if all your investments are currently low risk).
You may be able to achieve your goals purely by saving, but you will face an uphill battle against inflation and low-interest rates.
Investing helps you to reach your goals faster, provided you do so with guidance from a personal investment plan to avoid making major financial mistakes.
Diversify your investments
Long gone are the days where one can choose a single investment (or investment class) and put everything in one place.
Whether it involves “star performing” unit trusts, investment properties bought en-bloc or loading up all-in on the stock in your favorite company – it won’t work.
On the other hand, being overly diversified or having way too many investments that you cannot effectively monitor is an issue too.
You need to diversify without being spread too thin while keeping an eye on your investment returns.
Below is a glimpse of how positive or negative various sectors are in the new normal.
Bullish sectors (from most to least bullish)
- Healthcare
- Technology
- Software
Neutral sectors
- Utilities
- Infrastructure
- Consumer Products
Bearish sectors (from least to most bearish)
- REITs
- Plantation
- Industrial Products
- Construction
- Oil & Gas
- Properties
- Finance
- Travel and hotel
A recession or correction is all part of an overall major cycle that is bound to happen. We need not be fearful. Instead, we need to be prepared to invest wisely for the future.
Conclusion
The new normal is here to stay and will continue to evolve. You will be less worried when you know that the changes in the world and its volatility are to be expected.
Do have a good work-life balance and avoid burnout from the overload of information and noise, and be wary as scams and false gurus continue to prey on uninformed people.
Do take this time to learn and grow. Know yourself, your investment choices and how the world is changing.
Don’t have a fear of missing out, as everything in life – including the market and economy – moves in cycles. Know that there will be more opportunities ahead.
Don’t put all your eggs in one basket but don’t have too many baskets either. Investing is not easy, but it can be simple and profitable.
This article first appeared in MyPF. Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.