Homegrown e-commerce platform PGMall aims to compete with the big boys with its long-term growth strategy.
Being part of the booming e-commerce industry, PGMall is the fastest growing e-commerce platform in Malaysia.
However, this entirely homegrown operation has quickly established itself as one of Malaysia’s leading marketplaces and has big plans for expansion.
We sat down with Jerry Ng, the chief operating officer of PGMall as he outlines his vision.
Smart Investor: You studied physics for your degree and scientific computing for your Master’s, both in the UK. How did you find the transition from such contrasting industries to e-commerce?
Jerry Ng: Yes, I had a passion for physics and computing while I was pursuing my studies. After completing my studies, I secured a job in the UK as a software developer. This was definitely an extension of my passion in computing and I really enjoyed the experience.
And to be honest, I found that this transition over to e-commerce was not that big a jump. This is because whatever you need to do in the e-commerce industry, you need that technological understanding. This includes the operational side on the backend, as well as how to scale a marketplace platform from small volume of consumers, sellers and transactions to a much higher volume.
For me, my experience working as a software developer meant that I gained valuable technical knowledge while working on similar websites and companies. I believe this knowledge will help me guide PGMall in the coming years to the next level as we aim to transform into a highly scalable and cross-national entity.
SI: When talking about e-commerce, there are many other companies in the market. So what sets PGMall apart from these other marketplaces in Malaysia?
JN: The biggest thing that sets us apart is that PGMall is a fully, locally owned and operated company in contrast with the other two companies which have ties to China and Singapore. We are very proud to say that right now we are the number one local e-commerce player in Malaysia.
All things considered, we are doing well against our competitors considering that we are the third largest platform in Malaysia. We are delighted that we have managed to achieve significant growth over the past few years, alongside the explosive growth of the e-commerce market. We are also confident about our business model as our customer base is stickier than that of other platforms. This is because we reward our customers based on their behaviour; anytime they buy or spend on our platform, we will reward them accordingly.
If you’ve done your research on how to invest in Malaysia, there’s a good chance that you’ve come across the usual investment products such as unit trusts, the stock market, investment properties and other well-championed financial tools.
You may also have heard of the term REIT before, but it’s definitely not as popular as the other products. There’s a good chance you’ve had a relative or friend recommend hot stocks to you or recommend properties to invest in. But have you had the same people recommending Malaysian REITs to you? So what exactly does REIT stand for and what is this product that isn’t very well-known to the general public?
What is a REIT?
REIT stands for real estate investment trust and is a form of financial product that allows investors to get exposure to the real estate market. When it comes to investing in real estate, most people think of purchasing property to rent out to others, but real estate investment trusts offer many of the same benefits with less of the hassle.
You simply purchase shares in the REIT and leave the headaches of rental negotiation and collection, tenant sourcing, and property maintenance to the professionals, while collecting dividends a few times a year!
In fact, the average dividend distribution rate for some REITs even outpaces the rental yield of the average residential property, making it hard to argue against investing in REITs as opposed to purchasing your own property.
Fancy owning property in Kuala Lumpur without the hassle? REITs may be the answer.
For some individuals, they may even prefer investing in REITs as there’s no need to monitor the stock exchange news, revenue growth of companies and other time-consuming research. At most, they’ll just have to read the quarterly or annual reports published by the REITs about the current performance and yields.
There are currently 17 REITs listed on Bursa Malaysia for investors to buy shares in. REITs are considered a good investment for beginner investors as the initial entry price is low and dividends are consistently paid out at regular intervals. This also makes it a good defensive investment to hold in times of uncertainty.
For example, let’s say a REIT is selling at a share price of RM0.53. This means you just need RM53 to start investing. However, a more expensive REIT may cost much more, with some even priced above RM6 per share. This means investors need at least RM600 to start investing in those premium REITs.
So Which is the Best REIT in Malaysia?
If we could tell you, we’d all be rich investors! There’s no hard and fast rule to determine which is the best REIT as it depends on what you’re looking for when investing, just like when doing research on the stock market. If you have a higher risk tolerance, you may want to focus on a REIT that is less diversified (eg. retail only) but if you prefer steady dividends, you may want to invest in a REIT spread across several industries.
Here’s a quick and complete guide to the top 10 REITs in Malaysia to help you learn more about what’s available in the market:
Unlike many other REITs, the KLCC REIT only has three properties in its portfolio but these are enough to make it the largest REIT in Malaysia based on market capitalisation. It includes the PETRONAS Twin Towers, Menara 3 PETRONAS and Menara ExxonMobil, all of which have a 100% office occupancy rate as of the end of 2020. The only exception is the retail section of Menara 3 PETRONAS, which has a still healthy occupancy rate of 93%.
Another point to note is that it’s the most expensive REIT to own by far based on the prices on Bursa Malaysia. This can be attributed to its stable dividends and occupancy rates, making it an attractive option for investors on the lookout for REITs to invest in.
Notable properties: Mid Valley Megamall, The Gardens Mall
One of the most popular Malaysian REITs around, the IGB REIT is made up of only two shopping malls in its portfolio. However, these two malls are Mid Valley Megamall and The Gardens Mall in Kuala Lumpur, two of the most renowned shopping centres in Malaysia.
According to its latest annual report, the occupancy rate of Mid Valley Megamall stands at 99% while The Gardens Mall is at 92%. To maintain such numbers throughout the Covid-19 pandemic is impressive, but it remains to be seen if it can maintain this with the numerous Movement Control Orders that have been implemented.
Notable properties: Sunway Pyramid Mall, Sunway Medical Centre, Sunway Putra Mall, Sunway University
Another of the highly popular Malaysian REITs, it comprises of properties under the Sunway Group in a variety of industries, including retail, hospitality, corporate offices and education. Its retail and office properties currently boast a healthy occupancy rate despite the pandemic, but unsurprisingly the hospitality properties are currently struggling with travel not allowed under the Movement Control Order.
The diversity of the Sunway REIT could prove a crucial factor for potential investors, and could be a key mitigator against restrictions brought about by the pandemic. Whether reduced foot traffic will have a huge impact on the occupancy rates of its retail properties remain to be seen.
Notable properties: Pavilion Mall, The Intermark, Da Men Mall
The Pavilion REIT may only have five properties in its portfolio, but they’re some of the most recognised landmarks in the Klang Valley, including Pavilion Mall, Pavilion Tower, Intermark Mall, Da Men Mall and Elite Pavilion Mall.
With the properties covering the retail and corporate office sectors – two of Malaysia’s most dependable industries – it’s no surprise that its market capitalisation currently hovers over RM4 billion, demonstrating the trust that investors have in these evergreen industries. According to its latest annual report, the occupancy rate of most malls is above 80%, with only Da Men Mall lagging behind at 68.9%.
Notable properties: Menara Axis, Axis Business Park, Bukit Raja Distribution Centre, Tesco Bukit Indah
The Axis REIT is one of the largest in Malaysia based on market capitalisation, with the current figure standing at over RM2.8 billion! Its property portfolio current consists of buildings in various industries spread out across Peninsular Malaysia, including corporate offices, logistics warehousing, manufacturing, and retail.
Thanks to its diversity, it’s well-placed to mitigate the effects of the Covid-19 pandemic, with its dividend distribution consistently above 5% in the years prior, only dropping to 4.31% in 2020. These encouraging numbers are a key reason why this is one of the most popular REITs in Malaysia.
Notable properties: JW Marriott Hotel Kuala Lumpur, The Ritz-Carlton, The Majestic Hotel Kuala Lumpur
As the name suggests, the YTL Hospitality REIT is in the hospitality industry with a slew of hotels and resorts across Malaysia in its portfolio. An interesting note for investors is that the YTL Hospitality REIT offers international exposure as it owns multiple properties in Niseko, Japan and three branches of the Marriott Hotel in Australia (Sydney, Brisbane, and Melbourne).
It first acquired its Australian hospitality properties in 2012, while The Majestic Hotel Kuala Lumpur was taken over in 2017, making it the tenth property managed by the YTL Hospitality REIT in Malaysia. In 2018, it ventured to Japan with the acquisition of The Green Leaf Niseko Village. While the pandemic means that REITs focused on hospitality and tourism will take a hit in the short-term, it could potentially prove to be a shrewd investment in the long-term when borders are allowed to reopen and travellers can move around.
Notable properties: The Mines, Sungei Wang, Gurney Plaza
One of the foremost Malaysian REITs, there are only five properties in the Capitaland Malaysia Mall Trust REIT, all of which are shopping malls. However, there are currently 1,146 leases within those five malls, meaning the properties have an occupancy rate of 85.1% at the time of writing.
It also boasted healthy foot traffic of 32.4 million throughout 2020, making it a good option for those that are keen on healthy rental cash flow in their REIT portfolio. Whether it can maintain these numbers in the wake of the pandemic is another matter altogether. This could also bounce back in the long-term when lockdowns are eased and retail returns to normal, so investors with a higher risk appetite may consider purchasing shares while prices are lower.
Notable properties: Platinum Sentral, Menara Shell, Plaza Mont Kiara (partial), TESCO Building Jelutong
The majority of SENTRAL REIT’s properties in its portfolio is in the corporate office sector, with the remainder in retail assets and car parks. In total, it manages over 2.1 million square feet of lettable areas across its properties, with an average occupancy rate of 93% as of December 2020.
It remains to be seen if the Covid-19 pandemic and various MCOs imposed in Malaysia will affect its revenue in 2021, but its healthy office tenancy rate should help to maintain a sense of stability.
Notable properties: KPJ Damansara Specialist Hospital, KPJ Healthcare University College, Nilai, Jeta Gardens, Aged Care and Retirement Village (Australia)
The Al-‘Aqar Healthcare REIT is mostly made up of properties in the healthcare sector, with a total of 20 hospitals and care centres spread across Peninsular Malaysia. However, it also diversifies into the education sector, with KPJ Healthcare University College, Nilai, and KPJ International College, Penang being the two higher education properties in its portfolio.
Investors that want some exposure to foreign markets will be pleased to note that the Al-‘Aqar Healthcare REIT also manages a single retirement village property located in Australia. This offers investors potential foreign exposure, which could be key to mitigating risk.
Notable properties: UOA Corporate Tower, UOA Centre Parcels, UOA Damansara II
With the six properties in its portfolio all comprised of corporate offices, it’s clear which sector the UOA REIT focuses on. According to its latest publicly available annual report, the average occupancy rate is over 90% as of December 2019, and it is probably safe to assume that this number has dropped since the pandemic began.
However, its Q1 2021 report highlights the acquisition of the UOA Corporate Tower as a reason for the increase in gross rental income, which could be attractive for potential investors once the pandemic is over.
This article is provided for general information purposes only, and is not intended to be or constitutes financial advice from Smart Investor or our affiliates. We do not represent or claim that content in this article is accurate, complete or up to date. Data taken from bursamalaysia.com, klse.i3investor.com, and respective REIT companies.
A good financial plan creates a roadmap or a guiding light for your financial life journey. It’s more than money and gives you an overall picture of where you stand financially and where you’re heading to. It should include financial details about your cash flow, savings, debts, investments, insurance, and any other aspects of your finances.
Financial planning is an ongoing process that allows you to get your money and life under control so that you can reduce stress, fear, and worries about your future life. I think everyone should have one, and it can be done in your own style or with a financial planner. Remember, financial planning is not only for the wealthy or people earning a high income.
You don’t need sophisticated software or tools to draw up your own financial plan; instead a blank piece of paper will help you to kick start the process. Start by listing down what you have (assets eg. savings account, EPF, investment account, investment property, business, etc.) and what you owe (liabilities eg. mortgage loan, car loan, personal loan, credit card, study loan, etc.), income (cash inflow) and expenses (cash outflow). This will give you a snapshot of whether you’re at a financial surplus or deficit, making it easier to work out a financial plan – covered in the next step.
Setting goals for your financial plan
This is where you decide how to design your own life. When crafting your own financial plan from the viewpoint of what your money can do for you, you’ll make saving and investing feel more intentional than overspending it. Your goals should be inspirational, measurable, and realistic – ask yourself where do you see yourself in five years’, 10 years’ or even 20 years’ time? It’s important because it gives you direction to achieve your financial goals at different life stages and it also influences how you plan your career as well.
For example, there will be different needs when doing financial planning in your 20s, 30s, 40s and 50s. In your 20s, you might want to make sure you have sufficient emergency savings that lasts for at least three to six months so that in emergencies you won’t be running on credit. Don’t forget to factor in insurance and ensure you get adequate coverage for personal accidents and a medical plan.
In your 30s to 50s, you’ll likely be experiencing high commitments due to getting married, raising kids, preparing university tuition fees, and funding your retirement fund. As you progress from different life stages, you’ll need to regularly keep an eye on your allocations for investing and spending. If you know that these things will happen in your 30s to 50s, you may save and invest more in your 20s or prolong the retirement age from 55 to 60.
Monthly budgeting for your financial plan
The next step is to allocate your monthly budgeting – what is coming in and what is going out to understand your spending habits and only able to take a balance between spending and savings. It depends on where you live and how you spend – living in an urban area may result in spending more due to higher rent, eating out more etc. If you don’t spend more than half of your income, then you can start saving enough to fund your goals. Of course, you can’t own the whole world, but you can own the things that you value the most!
Executing your financial plan
This is all about allocating your resources or cash surplus to fund your goals. Saving and investing must come into play and you should consider the types of financial products, the risks, returns and liquidity, as well as understanding your risk tolerance. For example, if you set aside 15% of your gross income for long-term goals like retirement, you may consider investing in stocks or equity funds that aim for capital appreciation. For shorter goals like saving for an emergency fund, you wouldn’t put your money in a high-risk fund because you might need it quickly in an emergency. It’s best to have separate accounts for different funding purposes.
Review your financial plan
Lastly, review and monitor your financial plan regularly to ensure you exercise strict discipline with the flexibility to adjust accordingly in the future, especially when entering different life stages. It’s easy to talk and plan, but execution remains the most challenging task as we may not have the discipline to stay on track. So, reviewing, monitoring and fine-tuning acts as reminders of your goals all the time. It’s best if you can make it measurable so that you can reward yourself with small gift when you are on track!
A good financial plan is not a beautifully written document that is presented nicely to you. It’s a tool to track your progress and help you reevaluate plans after a life milestone such as getting married, raising a kid, buying your first property, upgrading to a new car, preparing for a kid’s college fee, or building your retirement fund. When everything is handled, you can enjoy living your life. The small steps you are taking now will definitely have a huge, positive impact on your future.
About the author
Eewen is a licensed financial planner and strongly upholds the belief that financial wellness is all about money bringing a positive impact into your life. She can be contacted at keaheewen@vka.com.my
Investing is a key component in building one’s wealth, and it’s widely known that the earlier you start, the better. With the Covid-19 pandemic causing many to lose their jobs and income, it’s no surprise that there has been a huge spark in interest in investing as people explore new ways of making money.
However, there are also plenty of pyramid schemes, “money games” and various other investment scams that have emerged, with unscrupulous individuals ready to take advantage of people’s desperation with promises of getting rich quickly.
Needless to say, you should be wary of such schemes and should look towards more established financial products like mutual funds, especially if you’re not a professional when it comes to investing.
What is a Mutual Fund?
A mutual fund is a form of financial product that involves multiple investors pooling money together to invest in shares of the funds, with the assets entrusted to investment management professionals.
This person or company will allocate assets accordingly depending on the mutual fund’s aims, which often include capital gains or income for investors.
In Malaysia, this tends to be in the form of the unit trust fund, whereby the funds pooled by investors is held by an independent trustee (which is often another bank), with any profits or capital gain paid out to individual investors instead of being automatically reinvested.
Investors typically earn money when they receive dividends from the stocks held by the funds, when the fund sells stocks that have increased in price, or when the unit trusts fund price increase, which can then be sold for a profit.
For best results, it’s wise to invest for the long-term, which usually means a time span of at least five years, if not more. Here’s a list of the 10 best mutual funds or unit trusts in Malaysia based on their performance over the past five years:
The TA Global Technology Fund is a unit trust run by TA Investment that focuses on technology assets, with a minimum of 95% of the net asset value to be invested into the Janus Henderson Horizon Fund – Global Technology Fund, while the remainder will be kept as liquid assets.
As of now, the top 10 holdings of this fund’s portfolio include Alphabet (the parent company of Google), Microsoft, Apple, Facebook, Taiwan Semiconductor Manufacturing, Samsung, Visa, Alibaba, Broadcom and PayPal.
This fund is suitable for investors that want to invest over the long-term, with specific exposure to the technology segment of the global economy.
The AmChina A-Shares – MYR unit trust is run by AmInvest, banking on the continued growth of the China market. A minimum of 95% of the net asset value will be invested Allianz China A-Shares.
Currently, the top sector allocations of this fund include financials, consumer staples and discretionary, industrials, materials, IT and healthcare, all of which are stable industries in China.
This fund is suitable for investors that want to invest over the long-term, with exposure to the upside potential of the China market.
Keep in mind that AmInvest defines long-term as an “investment horizon of at least 10 years” on its fact sheet, so it’s important to only invest money that you won’t need in the next decade. This is a key point to consider for any mutual fund or unit trust you are considering to invest in.
This unit trust is mostly made up of equities in US companies and is denominated in US dollars, which can be attractive to investors looking for greater exposure in a foreign currency.
Currently, the fund’s top ten holdings in its portfolio include Amazon, MasterCard, Microsoft, Apple, VISA, Alphabet, ServiceNow, NVIDIA, PayPal and Adobe – most of which are household names to Malaysians.
As seen from the minimum investment amounts needed, this mutual fund caters to a specific demographic of investors.
The good news is that there are plenty of mutual funds that are more cost-friendly, so don’t worry if you’re not able to overcome this particular barrier to entry.
The Franklin U.S. Opportunities – MYR unit trust is exactly the same as the funds above, with the only difference being the minimum investments needed to enter, as well as the denomination of the funds, which in this case is Ringgit Malaysia.
While it’s still not the most affordable funds to enter, it does offer more seasoned investors in Malaysia the chance to invest in the US market using local currency.
However, bear in mind that the minimum holding is 20,000 units while the minimum redemption amount is 2,000 units, which is double the requirements for the US dollar denominated fund which is 10,000 and 1,000 units respectively.
As the name suggests, the Principal Greater China Equity Fund – MYR invests in the Greater China region, and the low minimum investments make it a unit trust that is cost-friendly to beginners. Investors who have a medium- to long-term investment horizon and want exposure to Greater China markets can opt to invest in this mutual fund.
Currently, the top 10 holdings in its portfolio consist of Taiwan Semiconductor Manufacturing, Alibaba, Tencent, MediaTek, AIA Group, HSBC, Sands China, China Pacific Insurance Group, Great Wall Motors and Li Ning.
While some of these names may be more famous than others, the fund’s presence in a wide variety of industries means it is perfectly placed to mitigate risk, as well as ride any waves that emerge.
The Eastspring Investments Dinasti Equity Fund is a unit trust focused on growth, meaning it’s suitable for investors with a long-term investment horizon and have a higher tolerance for risk.
The majority of the fund is allocated to the technology sector, evidenced by the top five holdings in its portfolio – Taiwan Semiconductor Manufacturing, Tencent, Alibaba, Meituan and Mediatek.
An added bonus is that this is a Shariah-compliant unit trusts, making it suitable for Muslim investors who are eager to gain some exposure to Greater China markets.
The mutual fund aims to have a minimum of 70% of its net asset value in Shariah-compliant equities and equity funds related securities, with any balance to be held in sukuk and Islamic liquid assets.
The Manulife Investment Greater China Fund unit trust is run by Manulife and is suitable for investors with a medium- to long-term outlook for their investments, and want exposure to Greater China markets.
A minimum of 2% of the fund’s net asset value will be held in liquid assets, while anywhere from 70-98% of the fund will be allocated to equities and equity funds related securities at any time.
Currently, the fund focuses on investing in large companies with a market capitalisation of more than US$3 billion, as well as promising growth and earnings.
Consumer discretionary and IT make up over 50% of the asset allocation of this unit trust, while the top five holdings in its portfolio include Taiwan Semiconductor Manufacturing, Tencent, Alibaba, AIA and Meituan.
Manulife logo
8. Manulife Investment U.S. Equity Fund – MYR Class
Also run by Manulife, this unit trust is suitable for investors that want exposure to the US market and are willing to have a medium- to long-term investment horizon as well as a higher level of risk.
Currently, the majority of funds are allocated to the communication services, financials, consumer discretionary and IT sectors. The top five companies in its holdings are Amazon, Facebook, Apple, Alphabet and Cheniere Energy, most of which are well-known names in Malaysia.
While the minimum investment required for both Manulife mutual funds on this list are by no means the lowest, it’s still relatively affordable for those with some experience of investing and who want exposure to the world’s biggest market.
Affin Hwang Capital logo
9. Affin Hwang World Series – Global Equity Fund – MYR
As the name suggests, the Affin Hwang World Series – Global Equity Fund – MYR unit trust aims to provide investors exposure to global equities, with a heavy focus on the US markets.
A minimum of 70% of the unit trust’s net asset value will be invested in the Nikko AM Shenton Global Opportunities Fund, with a maximum of 30% kept in cash and liquid equivalents. At the time of writing, these figures stand at 97.8% and 2.2% respectively.
Investors will receive exposure to global equity markets in sectors like healthcare products and services, insurance, software, internet, home furnishings and food among others. The top holdings of the target fund include Microsoft, Amazon, HelloFresh, Livanova, Accenture and Sony to name a few.
Affin Hwang Capital
10. Affin Hwang World Series – Global Equity Fund – USD
This unit trust is exactly the same as the one above, except that the minimum unit trust investments required are much higher. Therefore, it’s more suitable for investors with a higher risk appetite and capital to invest, or those that own large amounts of US dollars.
Conclusion
There are hundreds of unit trusts fund in Malaysia, and it is wise to take your time to do your research in order to find the best unit trusts for you. This will vary based on your age, investment horizon, risk appetite and even personal beliefs.
Be sure not to rush into any unit trusts investment until you fully understand all aspects of what the fund is investing in, their past performance, and how it works, as well as the potential risk involved.
Be wary as well of eager fund managers or unit trust consultants that simply want to sell you unit trusts investments instead of having your best interests at heart.
While there’s nothing wrong with listening to professional fund managers’ advices or recommendations, it’s imperative that you study what you’re investing in yourself in order to gain a full understanding.
This article is provided for general information purposes only, and is not intended to be or constitutes financial advice from Smart Investor or our affiliates. We do not represent or claim that content in this article is accurate, complete or up to date. Fund performance data from fsmone.com.my and unit trust data from respective mutual fund houses.
Nowadays, the words “health” and “healthy” are very important. While the pandemic has taught many people different lessons, one of the most central ones is that it’s important for us to be healthy. Without good health, all other things may not take place, or be sustainable.
The concept of being healthy isn’t just limited to medicines or the fitness industry – it’s also widely used in the financial industry. These days, there are plenty of marketing messages that have the phrase “Financial Health” or “Financial Health Check” in a big, hard-to-miss font!
At a glance, it seems that we can get free financial health checks from different companies that offer different kinds of products. Life insurance companies offer this, banks may also offer this service, and in social media, we can see many different individuals, or product companies offering this, for free!
As a curious person, I tend to try out new things. And the most memorable one, I’d say, is one by a reputable insurance company offering a financial health check. I logged in to the portal to do mine; a few questions were asked about my age, marital status and whether I have children. It then asked me to rate a few scenarios that “concerns me”:
Hospitalisation
In the event I’m diagnosed with critical illness
In the event I’m disabled
In the event I meet with an accident
If I’m concern about money for my children’s education
After these questions, the next segment asked me to indicate how much insurance I have in respect to the areas mentioned above, followed by a question of how much of my current income goes to insurance premiums.
Boom, the results came out and I was eager to see if I’m considered financially healthy! The results show me, based on the coverage amount I keyed earlier, compared to people like me at this insurance company, whether I had higher or lower coverage for the respective areas. It even comes with a recommendation of what I “need”. You get it – according to this financial health check, I need more insurance products!
Just like this, am I supposed to say I’m financially healthier than most just because I have higher coverage on death and total permanent disability? Am I supposed to feel concerned just because “people like me” at this insurance company have a RM20,000 paid savings plan, but I have RM0; does that make me a bad father?
Comparing our situation to “people like me” as defined by a company, isn’t a good way to assess if we’re financially healthy. If this is a good approach, we should start comparing our situation to people in other countries, societies, and at other offices. But what is a fitting benchmark for this?
If this is considered a good approach, then if “people like me” in this country have a high amount of debt, should I start going all out and accumulating debt? I’m not sure how this makes any sense. It may make sense to some, but I’m still looking for a good explanation!
Comparison is the root of all evil and how we lose the clarity we need to live our own life. It also helps in feeding insecurity, jealousy, greed and other emotions that don’t empower us to be a better version of ourselves.
I think that if we want to understand if we’re financially healthy, it’s because we want to know if we have a good financial foundation. It’s like a table with four legs; we want to know if these four legs are strong enough, or whether it’s unstable and at risk of collapsing. We need this information because we care about maintaining the table and want it to continue being stable so that what’s on the table will be sustained and maintained.
In life, what’s on my table will be what’s important to me. For me, this includes my family, what kind of difference I can bring to the society, whether I’m making a difference, and helping people be better than they were the day before. But, without those four legs supporting my table top, these three items may not be around for long.
In the context of money and life, we can start from these four legs to find out if we’re financially healthy.
What are these four legs?
Emergency savings
For a start, I’d suggest looking at your emergency savings. If your savings can support you during sudden spikes in unexpected expenses, or ensure you go through challenging times when you lose your main income without having to lose sleep, your leg is quite stable and strong.
Are you saving enough?
Assess if you’re saving part of your income. A person spending all their income today will probably have to always look for money. The day their income stops, they’ll have issues maintaining the lifestyle they lead. On the contrary, a person who saves too much of their income today may not be able to enjoy life at all. Striking a balance seems to be important since none of us know if we’ll get the chance to enjoy our savings 20 years later.
Debt and commitments
Take a look at your debt situation. Do you have a habit of carrying outstanding debts forward month to month? How much of your take-home pay are you using to pay off loan instalments? If this amount takes up most of your income, it means you probably have less freedom and flexibility to try something new, since there are weights dragging this leg down. This means you may not be able to put on more weight to your table top.
Life goals
Finally, how well have you been preparing to achieve your life goals? For instance, my family is important to me, and if I were to leave them too soon, how long can they continue with minimal disruption? Have I done anything to ensure my frozen estate can reach them as quickly as possible with minimal costs? Am I on-track to provide my child with the kind of education I want?
By looking at your financial progress from this perspective, the benchmark you’ll use isn’t public, but rather what you want, and compared to where you are now. This allows you to fairly review the legs of your table. It’ll help you stay on-track and compare your current situation to your ideal goals instead of other people’s.
The points above are the four basic areas I think we should review if we want to understand our financial health. Of course, there are more areas such as if assets are optimised or liquid enough, ways to legally reduce taxes, or reducing the fees and cost we pay when we grow our wealth, etc. But this is a good starting point.
When was the last time you did a financial health check? By being part of the Money Warriors Community, you can learn how to make improvements to the four basic areas – save more, spend with peace of mind, reduce your debt, and be brave when you think of money.
About the author
Kevin Neoh is a NextGen Money Coach who works with people to help them transform their relationship with money to improve their lives with the money they have. Kevin can be contacted at kevin@nextgenadvisors.my and www.kevinneoh.my.
During these turbulent economic times, people may be tempted into taking drastic action with their investment portfolio. For example, if a RM100,000 investment is reduced to RM80,000, that may trigger various reactions towards that RM20,000 loss, such as selling all or some portion of the investment, buying more of that investment, or even doing nothing at all.
These possible reactions from different individuals can provide some important insights into risk profiling. With the current volatile market conditions, understanding investment risk and implementing a systematic investment plan would assist investors to meet their long-term financial goals. Investors might typically ask “What are the risks involved in portfolio investment? What is a safe investment portfolio? How much risk should I take?”
1. Volatility, market information and noise traders
Proper research prior to investing is crucial as it’s important to understand the types of risk associated with each investment. However, investors tend to be confused between the concepts of ‘risk’ and ‘volatility’. In financial terminology, risk refers to the probability of losing an investment capital based on the expected return on any particular investment. Meanwhile, volatility measures price fluctuations in a security, portfolio or market segment. Typically, market news, such as changes in the company’s management team or an announcement about share dividend payouts, can result in stock price volatility.
There’s a growing number of information channels now serving the market, to the point that investors aren’t able to monitor every piece of information released. In fact, many investment decisions are influenced by emotions rather than rationality, which makes them difficult to manage. This is because emotional investment reactions cause short-term volatility. For example, positive news usually gives happiness to the investor, while negative news can lead to excessive reactions.
Emotional investments are usually revealed through the distinction between informed and uninformed investors (noise traders) and how they interpret market information. Meanwhile, noise traders refers to investors who trade based on what they falsely believe to be special information or their misinterpretation of useful information regarding the future price or payouts of a risky asset.
One of the factors of noise trading is the need for liquidity. To be specific, investors may liquidate an investment in order to reduce the risk factors. They tend to buy and sell on market reaction. This is an impulsive action based on irrational exuberance or emotions, such as fear or greed, without any major consideration on the long-term returns.
2. Making informed investment decisions
In reality, investors become highly emotional upon experiencing losses to the point of even selling off their investment. Therefore, frequent updates of risk profiling are essential in order to match the investment portfolio with the investor’s risk appetite. By performing risk profiling, investment advisers would be able to identify the investor’s level of required returns and their risk appetite in terms of capacity and tolerance. As a result, their investment objectives could be better achieved.
Risk profiling involves three types of risk measurement: risk capacity, risk required and risk tolerance. Risk capacity is a mathematical measure of the maximum level of risk that the investor could manage before it affects his/her financial goals. Therefore, this should be determined in the early phase of the risk profiling process, and act as a reference for the investment portfolio risk. Furthermore, risk capacity could be used during risk analysis to help determine the choice of appropriate risk responses. Moreover, it would also help manage financial risk shifts in the long term. This is also influenced by the investor’s financial factors, such as promotion or job loss, new-born child, or health issue that could lead to unpredictable medical bills.
While the risk capacity indicates the maximum level of risk that an investor can manage, the risk required refers to the optimal level of risk managed by the investor to achieve the desired level of investment return. Reaching this level is essential to fulfil the investor’s investment objectives and it also shows the direct correlation of the required risk with the investor’s required level of return.
3. Systematic investing
There are two concepts to be considered by investors in systematic investing, namely diversification and dollar-cost averaging. Based on classical finance theory, an investor’s risk-averse traits will determine the proportion of allocation between a number of risky and less risky assets.
Asset allocation refers to a strategy used by individuals to divide their investment portfolio between diverse categories to minimise their investment risks. This strategy is in line with the saying ‘do not put all your eggs in one basket’. Moreover, investors can choose to invest in the money market, fixed income and equity market. The asset allocation in the investment portfolio will reflect the investor’s need for growth, income and liquidity. Therefore, the allocation should cover the investment horizons, risk-free rates and expected returns on risky assets.
The dollar-cost averaging (DCA) strategy implements a regular and periodic purchasing of an investment. DCA gained popularity among financial advisers and individual investors after the recession throughout the mid-1960s. Furthermore, it encourages the investment of the same amount of money rather than the same number of shares each period. As a result, investors can purchase more shares at a lower price compared to when the shares are priced higher.
4. Periodic review
It’s highly recommended that investors should regularly review their investment portfolio to make sure that their investment performance is in line with their expected returns and investment objectives. In the current volatile market, some investments may present good performance at times, while there are times when their performances won’t be as good, and vice versa. If this isn’t done, an investment with poor performance could significantly affect the whole portfolio’s returns, especially if it constitutes a big part of the portfolio.
By reviewing the investment portfolio, investors would be able to separate their emotions and tactical decisions from their pure investment processes. However, the key question is when investors should review their investment. In general, a review of investment portfolios should be done with their financial advisers on a yearly basis, but additional reviews should also be done when investors go through different stages of life.
To illustrate this point, during the early stages of an investor’s career, he or she would usually need a combination of liquidity and growth in their portfolio. Throughout their employment period, their risk and return preferences will reflect that they have stable incomes and they may experience an increase in their commitments and goals. Following that, as they approach retirement, the investment portfolio should primarily reflect their need for income, including several stages of growth to manage the effects of inflation.
Conclusion
Investor anxiety over a decrease in investment value by more than 30% is inevitable. In fact, when the market faces extreme volatility, some investors choose to rely on their instinct to make investment decisions instead of data and trends. While there may be a few extraordinary individuals who may make the right calls, most individuals end up making huge mistakes.
Essentially, risk is a natural component of investment. However, greater knowledge regarding the risks associated with investment and the practice of risk profiling would assist investors in determining their comfort level and building their portfolios and expectations accordingly.
About the author
Joe Tiong, CFP, Investment and Financial Planning Unit at UOB Kay Hian Wealth Advisors Sdn. Bhd. Her expertise is focused on financial planning and wealth management across an investor’s life cycle. She is also responsible for equipping financial advisors with the right skillset and materials in conducting business. She can be contacted at joe.tiong@uobkayhian.com
Squint eye or strabismus can be found in both children and adults, with each of the categories developing it due to a variety of reasons. With squint eye, the key is early detection and treatment, for the benefit of vision as well as the self-esteem of the patient. Dr Norazah Abdul Rahman, a Consultant Ophthalmologist and Paediatric Ophthalmologist & Strabismus at ParkCity Medical Centre, shines the light on the importance of early treatment of strabismus, especially for children.
By Esvaren Sekar
Strabismus is the medical term for the condition where the eyes point in different directions, resulting in misalignment of the eyes. There are few different types of squint: convergent squint (esotropia) when one eye turns inward, divergent squint (exotropia) when it turns outward, and vertical squint if the eye turns up or down. These types of squint could always be present or only appear intermittently at certain times.
Squint Eye in Children
“Squint eye usually appears in children before five years old, but it can also appear later. And it is not limited to children either, as adults can develop strabismus too. Though the main reason for strabismus is unknown, children with disorders that affect the brain such as cerebral palsy, Down syndrome, hydrocephalus, and brain tumour have higher chances of developing strabismus,” says Dr Norazah.
In Malaysia, one of the most common cases of strabismus is intermittent exotropia, a condition which allows patients to have straight, aligned eyes when they’re focused, but an eye will begin drifting away intermittently when they are ill, tired or daydream. Once they focus again, the eye will immediately go back to the normal position. Accounting for up to 30 per cent of all ocular misalignment in early childhood, intermittent exotropia starts to develop in a child between one and four years old.
In addition, another common case is undiagnosed refractive error among children causing acquired squint. For example, when a young child suffers from long-sightedness and has problem focusing on items that are near, they will start forcing their eyes, causing the eye to squint inwards.
“With children, it is very important for parents to keep an eye out for these signs. Children can be born with squint (known as congenital or infantile squint) and we can detect it as early as four months after being born. Most squints in children need to be evaluated as soon as possible to ensure the vision is protected and to improve the chances of successful treatment. Treatment is to improve eye alignment, and may involve glasses, eye exercises, prism, and eye muscle surgery. If your child has a lazy eye, they may even need to wear an eye patch to improve vision in the affected eye.
Squint Eye in Adults
Dr Norazah Abdul Rahman
For adults, squint eye could either be caused by issues that occur later in life or due to hidden squint eye during childhood that was left untreated.
“In younger population, we often find decompensated squint, which happens when an adult has squint at an early stage of life, but they managed to control it. So, the squint becomes masked. However, throughout their life, these adults might encounter any events and the squint becomes decompensated causing it to develop again. Most of the time it is trauma related, such as a motor vehicle accident,” explains Dr Norazah.
Apart from that, stroke also plays a part in squint eye in adults, as the nerve that controls the movement of the eyes in the brain becomes affected. A sign of squint eye in adults is also the appearance of double vision.
“Most adults who grow up with squint eye due to a lack of awareness. Adults with strabismus may have lack depth vision (3D) or stereopsis, which limits career opportunities. Furthermore, growing up with squint eye may cause the child to be bullied, resulting in low self-esteem as an adult,” says Dr Norazah.
Treating Squint Eye
Squint eye in children must be corrected early. “When a child has squint, we first look at non-surgical options for squint correction. For example, if they have refractive error, we give them glasses. A lot of children have good outcomes with glasses and the squint disappears. Some still have squint with glasses but decreases significantly, and we try to correct residual squint with surgery. In some cases, corrective surgery may be undertaken to correct double vision or, in young children, for the two eyes to work together to achieve depth vision,” explains Dr Norazah.
Meanwhile, adults with squint eye may receive glasses with prism if the angle of their squint is small. Nonetheless if they suffer from headaches or double vision, surgery is the go-to step.
“It is important for parents to not be afraid of sending their child for surgery if it is needed to treat squint eye. Not only is it very safe, but it will also help the child grow up to their full potential,” assures Dr Norazah.
