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Life can be complicated if we choose to make it so. As adults, we should know what makes us happy. Yet, most of us adults have fewer happy moments now compared to when we were younger. Is there a financial happiness formula?

After years of working experience, I’ve come to realise that the easiest way for us to achieve Financial Happiness is by going back to basics.

Most of us started our experience in dealing with numbers during our kindergarten years. We learnt about numbers, how to count and perform mathematical operations, geometry, and other math concepts from young till high school and beyond.

Due to not regularly practising these equations in everyday life, it’s not surprising that most adults develop misconceptions with the order of operations to be performed while solving a mathematical expression (BODMAS – acronym for Bracket, Order, Division, Multiplication, Addition, and Subtraction).

How Does One Reach Financial Happiness?

It is normal for us to begin practicing Addition from young, and by the time we joined the workforce, we would’ve become experts at this. Our environment trains us to view the Addition of new “wants” or “needs” positively; as something to be desired.

However, it’s rare for young adults to be taught how to differentiate between wants versus needs. The perception that “more is better than less” leads us towards the trappings of the proverbial rat race.

We fail to leverage our understanding of BODMAS in our financial life and furthermore, we aren’t aware of how it plays a vital role in our effort to pursue Financial Happiness.

BODMAS is the golden rule for solving equations and guides us on how to solve mathematical problems by following the correct sequence, otherwise, our answers may be wrong if we fail to follow the rules. When we apply the BODMAS rule to solve equations, we must first solve the Bracket.

Subsequently, we solve the Order (that mean powers, roots, etc), then we continue with Division, Multiplication, Addition, and Subtraction. The key point to note is that Division and Multiplication rank equally, and in fact take precedence over Addition and Subtraction.

Applying DMAS to Life

Taking a leaf out of the BODMAS system, I’d like to suggest that DMAS (Division, Multiplication, Addition and Subtraction) can be the core approach to solve our personal financial matters.

Let’s go through an example to see how we can achieve Financial Happiness by applying DMAS in our daily life.

By following the proper arrangement, we always start with either Division or Multiplication.

Division is the action of separating or process of splitting things into equal parts. This action and process is so much more meaningful when we apply it to determine our life priorities, for example in areas such as health, relationships, career or how we deal with money.

Obviously, we all understand that these priorities are equally important and deserve equal attention throughout our lifetime. 

In fact, changes in life stages and socio-culture environments might lead or force us to make disproportionate choices.

Common life problems such as financial or health, marriage and family, or career pressures often occur due to mistakes and failure to maintain the balance while fulfilling our needs.

Hence, a proper and systematic rebalancing strategy (also an important strategy in investment management) will enable us to review our situation and ensure we reposition ourselves at the appropriate ratio.

Multiplication gives the results of combining groups of equal sizes whereby we can consider it as repeated addition, creating a larger whole. Multiplication in finance is always related to the rule of compounding, and it amplifies our financial condition, either positively or negatively.

If we start off on the wrong foot, we’ll most likely end up with a bigger mistake. This can be clearly seen in the increasing number of Malaysians declared bankrupt or affected by overwhelming debts, especially credit card debts.

We should recognise that the rule of Multiplication is not limited to money but also other scarce resources such as our networks and knowledge.

As long as we’re able to identify the appropriate resources we want to grow, by putting enough time and effort, we will reap what we sow.

After applying both Division and Multiplication, you may now continue with Addition and Subtraction.

Addition of two whole numbers results in the total amount. In life, we tend to add new compartments by fate or chance. Given the same 24 hours a day or 365 days a year, we never tire of being attracted to new things and adding them to our bucket list.

All of us have a different threshold and we should know better the tipping point of fulfilling our own desires as we become older and more experienced.

Always take into consideration the results you will likely get from Division and Multiplication mentioned above. When the time is right, consider adding a new skill to grow your career, a new asset class into your investment horizon, or a good hobby or habit that helps you to excel in life.

Subtraction is the operation of removing objects from a collection. It’s not an easy task for us to practice even though more people are now attracted to the KonMari Method. With respect to financial matters, you may want to consider the two subtractions below:

1. Get rid of negative financial thoughts
2. Eliminate unwanted financial habits

There are no shortcuts to Financial Happiness. It only seems impossible if we don’t act at all. Apply the basic rules of DMAS patiently and wisely, and you will have an easier journey to achieve Financial Happiness.

About the author 

Jess Hon is a Licensed Financial Planner and can be contacted at jesshon@finwealth.com.my.

Kenanga Investors Bhd has always been guided by its unwavering conviction in the investment strategies that has weathered them through many challenging periods in the past. And this deep-rooted philosophy has proven its resilience, especially in these trying times.

The firm’s success isn’t a single-handed effort, however.

Rather, it is attributed to the organisation’s capable and dynamic investment team as well as the diversity of ideas, strengths and competencies that come from the team, Kenanga Investors Bhd chief executive officer Ismitz Matthew De Alwis tells Smart Investor.

“Diversity is strength, and together, all of us have worked tirelessly to uphold our firm’s philosophy that is ‘Consistent Top Performance’ and ensure sustainability in what we do,” he reveals candidly.

Key Drivers for Impressive Growth

Over the years, Kenanga Investors Bhd’s strategy to be a multi-segment, multi-distribution and multi-product platform has spurred the organisation’s strong growth.

“We are able to cater our services and products to meet different client risk appetites be it equity, fixed income, managed portfolios or even alternative investments.

“We achieve this by firstly prioritising the optimisation of our investment engine to create an alpha-centric performance culture – a culture that is the foundation of our consistent top performance,” De Alwis explains.

From a product perspective, Kenanga Investors Bhd has streamlined its entire suite of offerings to ensure their investors’ various needs are being met.

In addition to sourcing for new investment ideas and strengthening the distribution of the funds on their platform, much thought and effort has been put into ensuring their existing product line-up continue to contribute to their vision of being a market leader. This also provides a holistic approach to their clients’ investment and wealth management journey.

“We have also taken up the mantle of championing financial planning which will benefit our consultants and investors alike by focusing on a needs-based structure.

“This highly complements our goal of eventually becoming a one-stop wealth advisory firm with access to all capital market products while also providing holistic financial planning to our clients,” says De Alwis.

Pandemic’s Impact on Fund Management Strategies

Kenanga Investors Bhd’s investment strategy, reveals De Alwis, has always been premised on a bottom-up stock-picking approach on stocks that can offer a strong earnings trajectory.

As such, across its top-performing funds, the common performance contributors are their overweight positions in technology and rubber glove sectors, with the global outbreak of the Covid-19 pandemic leading to a surge in demand for glove products.

“This strong earnings profile coming from the tech sector especially is a showcase of not only their capabilities but the emerging importance of home-grown Malaysian technology companies in the global semiconductor supply chain.

“Kenanga Investors Bhd believes there are structural drivers such as the rising adoption of 5G, artificial intelligence, electric vehicles and industrial automation and thus the supply chain that provides the components to these industries will benefit.

“Besides growth, tech stocks also have solid balance sheets and strong cash flows which enable them to weather an economic downturn better than some other cyclical.”

For check and balance, De Alwis reveals Kenanga Investors Bhd adopts a holistic approach to risk management to prepare the firm for inevitable situations by identifying, assessing, reporting and managing the probability and impact of all related activities.

Indicators are used to provide early warning signals which then determine the responses required. For instance, during unsustainable bull markets, their indicators may help them to avoid companies with weak fundamentals or to avoid paying excessive prices for stocks relative to its intrinsic value.

“Kenanga Investors Bhd’s risk management policies that our returns commensurate with the risks we take which means achieving out-performance without taking on more risk.”

Navigating Market Complexities of Tomorrow

The economic fallout from the pandemic has many Malaysians questioning their financial security, with concerns such as needing to postpone retirement or tapping into savings to pay for basic expenses.

So how does Kenanga Investors Bhd address such concerns?

The firm, according to De Alwis, has always been known as an equities expert within the Malaysian landscape. Since 2019, however, they have expanded into the fixed income space after a strategic mergers and acquisitions (M&A) exercise, while in early 2020, Kenanga Investors Bhd launched Malaysia’s first leveraged and inverse ETF to be benchmarked against the FTSE Bursa KLCI.

“Investors now have the flexibility to diversify their portfolios further to suit changing needs and investment environments backed by superior and holistic investment expertise.

“Furthermore, Kenanga Investors Bhd’s on the financial planning model ensures we are a needs-based asset manager, instead of mere product-pushing which may not benefit investors in the long run,” says De Alwis, stressing the firm is now more equipped than ever to guide investors of today in navigating the market complexities of tomorrow.

By helping an investor map out their risks and goals to develop a plan (possibly comprising a diversified portfolio of various asset classes), they will eventually achieve their intended goal.

“Following that, we will work hand-in-hand with the investor to keep periodic tabs on their overall portfolio to ensure they are on the right track and to make adjustments where necessary.

“It is critical for the investor to stay diversified so that the various assets in the portfolio can take advantage of different economic conditions, leading to the best possible outcomes during crashes,” he adds.

De Alwis goes on to highlight the need for investors to avoid following a herd mentality, especially when they are caught in times of crises.

“It is easy to follow where the crowd goes because many believe there is safety in numbers. But when it comes to personal financials, one person’s risk appetite and goals can differ to the next person’s.

“With Kenanga Investors Bhd in the picture, we can help the investor to assess their situation before they indulge in panic selling and finding out later that they would have recovered or profited had they stayed the course,” he concludes.

By Bernie Yeo

In the digital age, many young Malaysians are eager to invest and grow their hard-earned money.

Through information, they have obtained on the internet and through their peers, they understand the importance of growing their wealth through investing and have a desire to achieve financial independence as early as possible.

There are also young adults who find it more comfortable to not invest until their financial situation becomes more stable or they have more money to invest.

For this category, they are looking to invest and will do so when they have the extra disposable income to set aside.

There are also others who have embraced the YOLO lifestyle, looking to live in the present and are accustomed to instant gratification.

They spend every ringgit they earn, and perhaps even more by borrowing through their credit card or personal loans and choosing to let tomorrow worry about itself.

Whichever category you may fit in, one key point to take home is that if you’re in your 20s, you have a big advantage over many others when it comes to investing.

Here are three reasons why your age can be your biggest advantage:

1. Time and Compounding Interest

There is a famous saying attributed to Albert Einstein where he called compound interest the “8th Wonder of the World.”

Whether Einstein said this or not, compound interest is the key that allows young investors to grow their wealth over time.

Compound interest requires only two things: the reinvestment of earnings and time.

• Compound interest can be thought of as “interest on interest,” and will make a sum grow at a faster rate than the simple interest which is calculated only on the principal amount.
• Interest can be compounded on any given frequency schedule from daily, to annually.
• When calculating compound interest, the number of compounding periods makes a significant difference.

Assuming a 6% interest rate per annum, the table below shows the stark difference in the final amount based on how long an initial investment of RM10,000 is put to work:

Starting Age	Compounding Period (Years)	Final Amount at Age 60
20	40	RM 102,857
30	30	RM 57,434
40	20	RM 32,071

The longer money is put to work, the more wealth it can generate in the future for you.

Here’s another chart that demonstrates how much you would need to set aside every month at different ages, assuming you are looking to accumulate RM1 million for your retirement.

As shown below, if you start investing at an earlier age, it is much easier to hit your financial targets through the sheer power of compounding interest.

2. The Ability To Take Risk

It goes without saying that higher-risk investments that are more volatile yield the highest return. Simply put, the higher the risk, the higher the return and the lower risk, the lower the return.

Younger investors are usually focused on growing their wealth and should invest in higher return investments.

This is because you have the time to recover if something were to go wrong, giving you the opportunity to make riskier moves. For example, when you are in your 20s, even if you suffer a loss today, you’ll be working for the next 25-40 years and have many years to earn an income. In short, you’ll likely recover from that investment loss.

Those who begin to invest late in life are often inherently more cautious with how they invest their money.

As one nears retirement, one usually starts allocating their investment portfolio to lower risk assets which correspondingly have lower returns. By starting late and having lower returns, one might fall short of their financial goals.

3. Learning by Doing

As a younger investor, you have the flexibility and time to study investing and learn from both successes and failures.

Since investing has a fairly lengthy learning curve, young adults are at an advantage because they have years to study the markets and refine their investing strategies.

You will make money, and lose money on some investments.

Examples of things one needs to learn can include opening a stock trading account, opening a mutual fund account, buying real estate, or even calculating investment returns – these are all best learnt through experience.

There are many other aspects when it comes to investing such as understanding how the market works, how the economic cycle affects your investment, or how mutual funds and Robo-advisor fees can affect your returns.

Gaining this experience at a younger age will give you the confidence and knowledge to invest and grow your wealth to achieve your financial goals in the long term.

Capitalise on Your Biggest Advantage

There are many factors that one looks at when designing an investment portfolio. Ultimately, it should be designed to allow you to achieve your financial goals, be it short-term such as planning for a wedding, or long-term such as retirement.

It cannot be overstated how beneficial it is to start early. In today’s information age, it’s your responsibility as a young investor to educate yourself on investing and take action to capitalise on the key advantage you have, which is time.

Time cannot be bought and unlike investment losses, lost time cannot be recovered.

Every day you delay is an opportunity loss to capitalise on the power of compounding interest and the ability to take risks.

When one starts early, you get to learn from experience and make mistakes when they are less costly (ie. you have less money to lose) compared to when you get older.

About the author

Nicholas Wong is a licensed financial planner and can be contacted at nicholas.wong@ipp.com.my.

In the previous month, I talked about the importance of having an emergency fund. This will put us in a better place to deal with surprises and curveballs in life. 

Sometimes, this sounds like a no-brainer as most of us are well aware of this. Yet, according to some statistics published in the media, we are constantly reminded of the dire situation among consumers.

The most infamous one is the Bank Negara Malaysia study that showed 75% of Malaysians would struggle to come up with RM1,000 to deal with unexpected situations.  

This is the kind of number that makes me feel frustrated, and sad at the same time.

On one hand, people gladly use this revelation as a ‘sales tool’ to create a need for consumers to buy their financial products.

On the other hand, it does highlight a serious scenario that needs attention. People are finding it hard to save, and worse, deal with any unexpected situation, which we’re almost ‘guaranteed’ to face in life. 

As painful as it sounds, I really hope I can play my part to help people build up their savings.

Here are some suggestions that you can use as a guide in your efforts to build up your own emergency fund.

I hope this will help make it easier, and together, we’ll bring down that 75% to a much lower number! 

A Ringgit Saved = A Ringgit Earned  

Commonly, people tend to say “I will save what I have at the end of the month”.

Just because most people adopt this mindset, it doesn’t mean this is an effective approach. In fact, based on experience, almost everyone that struggles to save money has told themselves this.

The results show that this mindset will only get us limited results. 

If you’re a salaried person, have you ever struggled to pay your income tax bill? The answer is most likely “No”. Why do you think this is?

That’s because, before the money even reaches your hand, it’s already been ‘taken out’ and ‘paid’ to where it should go.  

If you’re still not convinced, how do you think your EPF account continues to grow in size each year?

While the dividend is a good reason, however, the main reason you see the amount grow is due to the regular contribution, which again, before you can ever touch it, has already been redirected towards your EPF account. 

If you want to see a different outcome, from “I can’t save” to “I am saving”, you just have to change the sequence.

Save first, spend the rest. It’s as easy as this! 

Where Do You Keep This Money? 

Keeping your savings in your salary-receiving account is never a good idea.

A majority of people I’ve interacted with seemed to know this. Some of them who have trouble saving up their emergency fund tend to keep this money in a separate account.  

However, this account also tends to be their ‘day-to-day’ account. Perhaps that’s another reason why your savings won’t sit there for long.

We’re creatures of habit, and our basic instinct is wired to spend money.

To build on this instinct, we’re also constantly bombarded by messages, advertisements, and opportunities that induce us to spend and part with our money. This eventually creates an inevitable outcome, which is helping us to spend.  

For what it’s worth, do note that there’s nothing wrong with keeping your emergency savings in your day-to-day account. It’s just that it increases the likelihood for the money to leave you.

For example, in the middle of last month, I saw my day-to-day account still had about RM4,000. 

This immediately made me feel excited knowing I still have RM4,000 to spend for the next two weeks.

However, when I checked my credit card used for the past 2 weeks, I noted that the balance has already built up to about RM2,000+.

This instantly means my real spending amount is not RM4,000 (although the money is there), but just the leftover after paying off my credit card.  

This is what is likely to happen to emergency savings if mixed with your day-to-day account. And since emergency savings are so important, you should avoid this possibility at all costs.  

In general, an ideal place to keep this money will be a place where we don’t have to worry about the value of the money.

This means it shouldn’t be placed in accounts or asset classes that tend to be volatile. The idea is for it to be easily accessible anytime we need it, and as soon as possible.  

How Much Do I Need to Save? 

While there are plenty of guides or rules of thumb offering answers to this question, please note that you can actually determine this.

You don’t have to let existing guides tell you how much you need to save up.  

Have you ever tried travelling to the moon? I can confidently ‘predict’ that most of you haven’t or even thought about doing this.

For things that you don’t think is possible, chances are you’ll never even bother trying to do it. 

Another common situation I tend to encounter often is that people ‘plan’ to save a huge amount, or when they apply the rule of thumb, the projected amount made them feel hopeless.

This feeling ends up making them feel defeated, resulting in them giving up trying. To them, this amount is like travelling to the moon! 

When it comes to emergencies, we can never predict what will happen, hence it’s impossible to predict how much we’ll need.

Therefore, you can aim for emergency savings as low as RM1,000. Even RM50 can be crucial. Imagine someone without any savings, who one day needed to go to the clinic to get a consultation for a fever. To them, RM50 is a huge deal. 

So, if you’re low on your emergency savings, don’t despair. Start saving up in small amounts. It’ll be better than when you haven’t set aside this small amount that doesn’t seem to matter now.

When you’ve built enough momentum and have a small fund, start to make it a goal to save up for one month of your expenses, then three months, then six months, then a year or more.  

Just like collecting water in a tank, you must ensure you store as much as possible and refill it to the maximum level each time you use it up when there’s a water disruption.

If you have to dip your hand into this pot in between, make it a point to refill it.  

About the author 

Kevin Neoh is a NextGen Money Coach and can be contacted at kevin@nextgenadvisors.my and www.kevinneoh.my. 

Pre-payment of a loan is the payment of the outstanding loan amount before it becomes due. This usually comes in the form of a car loan.

For example, if you have a house loan for 35 years, you can opt to pay off the remaining balance at year 10 and free yourself from the monthly repayment from year 11 onwards.

The way I see it, loans when used correctly can be very powerful, but when abused / ignorant it will be destructive.

Today, I want to take an objective angle on this – backed with numbers, of course. Before answering the question “Should I settle my loan early?”, I want to highlight a term.

Opportunity Cost

This often comes up in the subject of finance and economics. In truth, you experience this in our lives daily. Opportunity cost refers to the loss of something when you choose one option over the other.

If you snooze your alarm, you lose 10 minutes of being awake for the benefit of 10 more minutes of sleep/rest.

When you choose to drive to work, it takes 30 minutes of focus on the road vs paying RM10 for 30 minutes of free time in a cab. Spending RM5,000 on a new phone takes RM5,000 away from other things like investment, a holiday to Thailand, a laptop for work, etc.

Investing in stock A means less/no cash to invest in other companies.

You will always face the question of “what is the opportunity cost” when you make choices. And you make lots of choices every day, though some are more obvious than others.

Loans and prepayments present a very relevant opportunity cost issue – interest rates.

Interest Rates

Fixed Rates

Fixed interest rates are not affected by the changes in the market and will remain the same throughout the tenure of the loan.

Variable/Floating Rates

Variable interest rates are tied to and will change in accordance with the market reference rate – this usually means the change of the overnight policy rates (OPR) in Malaysia or “prime/base rates”.

Structure – Flat

A flat interest rate structure calculates the interest rates based on the original loan amount regardless of how much principal has been paid down.

Structure – Reducing Balance

Reducing balance calculates the interest rate payable based on the amount of principal outstanding.

The interest portion of the loan instalment reduces (and the principal portion increases) every month because the principal is being paid down in each instalment.

Structure (TRAP) – Rule of 78

This is commonly found in cars and personal loans. In short, you pay most of your interest rates at the start of the loan as opposed to evenly distributing across the loan tenure.

Yes, this means that if you prepay at a later stage of the loan tenure, there are not much interest savings because you would have paid up most of our interest portion by then.

You can read up about the rule of 78 by doing your own research, but be warned that you might get upset once you discover how some bank loans work!

4 Horsemen of Loans for Individuals

I’ll approach this section on four fronts – interest rate type, loan structure, interest rate and prepayment opportunity cost.

1. House Loan

Interest Rate Type: Commonly variable / floating

Loan Structure: Reducing balance

Interest Rate: Base Lending Rate minus 2.5% (Averages around 3.3% as of now)

Opportunity Cost: A house loan is typically quite a big sum.

Hence, to prepay it involves coughing out big money! This will forgo a lot of other purchases/investment opportunities that may generate income more than the 3% – 5% interest rate (floating rate) paid here.

Verdict: Given the interest rate that we are paying and the reducing balance interest rate, it is better to use the capital to invest in assets that can generate returns beyond 5%, including ASB / ASM, REITS, etc.

On top of that, if it’s an investment property that is generating rental income, then is the monthly instalment actually still an issue?

2. Car Loan

Interest Rate Type: Fixed

Loan Structure: Flat + Rule of 78 Trap

Interest Rate: 2.9% – 3.3% (Effective Interest Rate is 5.5% – 6.2%)

Opportunity Cost: The amount of interest savings from prepayment depends on when we prepay. The earlier we prepay -> The more interest we save -> But the more capital we need.

Prepaying early would require bigger capital, hence losing out on investment returns. Prepaying later would be sacrificing investment returns for not many savings in interest payment.

Verdict: Given the nature of the Rule of 78 and the EIR of about 6%, we have screwed all ways.

It’s highly likely not worth it to prepay since the interest savings would not be much a few years down the loan tenure.

The capital can be better used to invest in assets that can generate higher returns than the interest rate and compound the returns from such investments.

If you want to prepay very early in the loan, you might as well buy the car in cash!

3. Personal Loan

Interest Rate Type: Fixed

Loan Structure: Flat + Rule of 78 Trap

Interest Rate: 4% – 7% (Effective Interest Rate is 7.5% – 13.5%)

Opportunity Cost: Forgo investment returns on the prepayment capital in exchange for saving effectively 7.5% – 13.5% interest charges annually. But again, this is subject to the Rule of 78 issues, similar to the car loan.

Verdict: Given the high EIR, it’s highly likely that prepayment is a better choice to avoid serving an extended loan.

I suggest using a loan settlement calculator to see how much you would save, before deciding whether your capital is better used to prepay or to invest and generate higher returns.

4. Credit Card Loan

Interest Rate Type: Fixed

Loan Structure: Special as it is based on your last month’s outstanding amount but with an interest that is compounded daily – read more on iMoney for the exact details

Interest Rate: 15% – 18% tiered and compounded daily effectively making it up to 20%

Opportunity Cost: Forgo investment returns on the prepayment capital in exchange for saving up to 20% interest charges annually.

Verdict: I’ve said before that I love using credit cards compared to other payment methods.

However, as a loan, it’s ridiculous due to the way the interest is structured as well as the exorbitant interest rates.

If you don’t pay your credit card loan ASAP, you’d incur the interest rate wrath of up to 20% effectively (due to the daily compounding).

I don’t know any investments out there that provide more than 20% returns consistently, so I won’t hesitate to prepay this in full today. In my opinion, avoid getting into this loan in the first place!

The Ultimate Opportunity Cost

So, should I settle my loan early? To answer this question – it depends on what your opportunity cost is when you choose to prepay.

In my choices above, I won’t prepay if I can use the capital to generate higher returns elsewhere compared to the interest rate that I am paying for.

The ultimate opportunity cost here is this – getting a loan allows you to use less capital to acquire an asset in exchange for paying an “interest rate”.

If I have RM100,000, I can use RM10,000 to pay for the downpayment of a house worth RM100,000.

I could borrow RM90,000 with an interest rate of 3%, but use this RM90,000 to invest into a REIT that pays out 5% dividend yield. 

From this 5% return, I pay the loan of 3% and I still have 2% in returns that I can reinvest to get more returns.

Essentially, I own a house with RM10,000, and RM90,000 worth of REIT shares and generate a net return of 2% on the RM90,000, which will be compounded.

And this is without renting out the property. It’s a simple example, but it showcases the power of using loans the right way.

The other option is using RM100,000 to buy the house in cash. I now have a house and no cash or extra investments. Are you seeing what I see?

About the Author

This article was originally published at betweenthemoney.com, a personal finance website by Jason Loh that focuses on money matters and investment topics for Malaysians.