Empowering your finances in 2017

(Left) Eliza Ong, managing director and regional head of RHB Asset Management. (Right) U Chen Hock, head of group retail banking at RHB Bank Bhd.

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We are at the start of a new quarter, filled with new resolutions and hopes. And while the economy remains uncertain to many, it is predicted to remain resilient against various headwinds in the year to come.

Stock market volatility, the rebalancing of China’s economy, further declines in oil prices, signs of rising inflation and new political uncertainties around the world will take Malaysia along on a rough ride. However, equipping yourself with sound analysis and a team of experts to take charge of your finances will propel you forward, allowing you to take advantage of new investment opportunities.

According to new economic analysis by the World Bank, Malaysia’s gross domestic product growth is projected to rise from 4.2% last year to 4.3% in 2017. It notes that most of the risks facing the economy stem from external global factors.

“Investment opportunities remain prevalent, even in times of volatility,” says U Chen Hock, head of group retail banking at RHB Bank Bhd.

“At every stage of the economic cycle, there will be business sectors and economies that perform better or are more resilient than others. However, retail investors would be well advised to seek out experienced fund managers, like RHB Asset Management, to advise them on those opportunities so an informed investment decision can be made,” he says.

Understanding Malaysia in the midst of the global economy
The inter-relational nature of the global economy means that Malaysia will be clouded by uncertainties resulting from various political phenomena, such as the UK’s vote last year to leave the European Union. This year, we expect that three major political events — general elections in France and The Netherlands as well as Germany’s parliamentary elections — could markedly affect global market dynamics.

Secondly, tensions from the American political arena with pro-growth policies and anti-trade sentiment may yield unintended consequences for the Malaysian market. In the event US corporations are forced to bring back jobs to the US, labour costs will increase significantly from, say, a US$5 wage in a developing country to a fivefold cost in the US. This could potentially put immense strain on the country’s profits and earnings.

Against this backdrop of the external environment, examining the balance between upside and downside risks to Malaysia’s economic growth outlook remains crucial.

What are your predictions for the Malaysian economy? Can we expect a stronger positive growth in 2017?
U: There are early signs that 2017 will likely end on a more positive note than 2016 for the Malaysian economy. This optimism is based on recent strength seen in the global oil market, improving crude palm oil prices and general feedback on consumer sentiments on the ground.

What is a key strategy in investments this year? Why is diversification of the investment portfolio crucial in times of volatility?
U: A well-balanced diversification strategy will help an investor to maximise returns in the face of heightened volatility that can cause unpredictable outcomes. This can provide a cushion as your bets are better spread out.

 

Here are five essential ways to take control of your finances this year

1. Invest in managed portfolios
Many investors might not have the resources or the time to purchase individual securities such as stocks and bonds. In order to profit from investing in individual securities, an investor not only needs resources and time, but a considerable amount of expertise. With unit trusts, investors can invest through the skills and experience of professional fund managers.

In theory and generally in practice, fund managers have expertise beyond that of the general public. They possess advanced skills through specialised education, experience and professional designations. They also have access to extensive research reports, company executives, competitor information and other important data that is necessary to make wise investments within their mutual fund.

By engaging with the right fund manager, you can rest assured that your money will work hard for you while you focus on other life priorities.

2. Diversify your investment portfolio
Diversification of an investment portfolio is one of the chief means of reducing risk and volatility. In light of this, RHB is aiming to widen its product range to better cater for the specific needs of customers. The first step involves adopting an open-architecture business model that gives clients access to the best products. This will also provide a more robust risk management framework and an international network of investment resources. In the coming year, more partnerships will be expected in the pursuit of effective long-term performance for customers.

“The notion of not putting all your eggs in one basket is key in times of volatility. Diversification aims to maximise returns by investing in different asset classes and instruments that would react differently to the same event. It helps investors achieve long-term financial goals while minimising the  risk of potential losses,” says Eliza Ong, managing director and regional head of RHB Asset Management.

This is a year for investors to explore investment-grade and short-term bonds. In line with this, RHB provides mutual bonds and close-ended bonds that provide stable yields to weather economic uncertainties. In addition, RHB will also be looking at ways to expand customers’ portfolios through retail bonds — products that will fit clients with a low-risk appetite who are looking for solid investment options.

RHB’s goal for the year is to put customers first by providing a wider, more competitive array of investment solutions.

3. Invest only if you understand the product
In times of economic volatility, it is crucial to invest in financial products that you truly understand and are comfortable with. Through a wide array of products and services offered by RHB, such as bonds, deposits and equity, RHB Premier’s relationship managers provide thorough research and solutions to customers. This ensures a balanced and resilient investment portfolio to weather global market volatility. Furthermore, obtaining a second opinion from advisers and experts will help in making sound investment decisions.

4. Prepare for the unexpected
Consider insuring yourself with asset classes that can yield instant liquidity in the event of unforeseen circumstances. Short-term pay programmes with high coverage are effective in providing you with peace of mind over your overall finances. This is crucial to protect against emergencies that may require instant handouts in unexpected situations.

5. Build your legacy with trustees
Corporate and retail trustee services range from providing trustees for unit trust schemes and real estate investment trusts, to writing wills and private trust and estate administration services.

“People have worked hard to build up and accumulate their wealth for their family and for future generations. They would like to preserve their wealth and make sure it gets passed to the right people at the right time,” says Tony Chieng, Head of RHB Trustees Bhd.

For businesses that are looking to weather financial volatility, RHB provides sound business proposals to ensure the continuity of their wealth. Each trust solution is tailor-made to meet individual needs, be it medical, life or welfare and charities. Plus, a specific business succession trust model mimics the way customers’ businesses are run. This means ensuring that the legacy of a business can be preserved as if nothing has changed.

“Trustees usually come in a tailor-made package, and provide customers with accessible consultants to tackle the question, ‘How should I put my assets into an executable kind of will?’,” says Chieng.

This is good news for businesses and individuals alike. Businesses engaged in high-risk industries, or those susceptible to economic volatility, will gain from trustee services as banks such as RHB would step in to provide solutions to help customers pull through periods of uncertainty.

“Don't shy away from the market during volatile times,” says Ong.

“Remain invested. The key is to speak to experts who can better advise you where and how to diversify your portfolio so you can reap the rewards of achieving wealth protection and wealth preservation.”

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