Category: Investments

With many uncertainties coming our way such as the recession and general election, there are a lot of jittery investors out there. Throw in volatility, rising inflation, hikes in interest rates, and we have ourselves a storm in the coming year.

With that, Smart Investor organised and moderated the webinar ‘Where To Invest In 2023’ attracting hundreds of participants where they attended a fruitful session and discussion between three industry experts sharing their thoughts and views.

The panel was made up of three industry experts: Lim Chia Wei, a senior portfolio manager at Affin Hwang Asset Management; Julian Suresh, the executive director and chief investment officer at Redvest Wealth & Asset Management; and Jason Wong Jia Jun, CFA and research manager at FSMOne Malaysia.

Where To Invest In 2023

We started off with the question: “The dreaded R-word is popping up again and haunting investors. Do you think we are headed for a recession and how do you think Asia will weather through the crisis this time? Could we see a repeat of 1997 or something milder?”

Chia Wei states that we might go into recession in the next six to twelve months down the road, but it would not be as bad as previous recessions. He also shares that most Asian countries are in a much better position in 2022 as compared to 1996, with better current account balances, as a result of a better performing Gross Domestic Product (GDP) in countries such as Singapore, Taiwan, Hong Kong, Malaysia, Korea, and Indonesia. The number of Forex reserves is also highlighted with Hong Kong, Singapore and Thailand showing the way.

Next, we ask the question: “What other key events are you keeping an eye for in 2023? Are there any black swans on the horizon?”

Chia Wei responded: “The stock market has declined a lot and is nearing the bottom, with the bear market already in the US and Asia. The stock market will always bottom out and rebound before the end of a recession.”

To spot the end of a recession, he advises us to look out for the potential easing of inflation and bond yields to go down from a very high level. We should also watch out for a weaker US Dollar (USD), that will see Asian stock markets recovering.

He also cautions us to be aware of the potential escalation of the Russia-Ukraine conflict or the potential of an embargo on oil exports which could cause a spike in oil prices. This will in turn cause the bond yield to rise and with the strengthening of USD, this will have a negative effect on most investment assets.

With such a backdrop of impending uncertainties, one must be asking what can we do next? How do you position your portfolios? Specifically, we ask: “What are some of your sector preferences and which ones do you think would be vulnerable in this environment?”

“We are currently underweight on certain sectors such as banking, semiconductors, and commodities; these industries tend to suffer more during a recession. We are overweight on defensive sectors, such as consumer and health care,” answered Chia Wei.

When the recession bottoms out in 2023, he suggests revisiting and taking a closer look at the aforementioned industries (banking, semiconductors, commodities). But he also warns that we might hit the bottom only in 2024, if things don’t do too well.

Chia Wei also shares a recent positive indicator being the Consumer Price Index (CPI) measuring the change in the price of goods and services from the perspective of the consumer. It is key to measure changes in purchasing trends and inflation. Even though the CPI is bullish, inflation is expected to remain high in the United States (US).

Malaysia is also expected to further hike up interest rates, but on a more gradual basis. This would give the Malaysian economy more time to digest, especially with higher monthly instalments such as housing loans that will increase gradually. But the slower hike in interest rates as compared to the US with its aggressive hikes, will make the USD stronger against the Malaysian Ringgit.

Read: Investment Risk Management With 6 Simple Ways

Which brings us to the question about the USD. “What is going on with the strong USD? What causes it to go up?”, we ask our next panellist Julian
Suresh to explain further.

According to Suresh, there are a lot of factors causing the USD to rise against most major currencies around the world. Some of the factors include
the Russia-Ukraine conflict, high CPI numbers in the US leading to high inflation, and global growth concerns or the looming recession.

The USD is moving within expectation, and with the Federal Reserve expected to hike up interest rates, we shall see the USD continue to strengthen. And if each rise in interest rates is higher than expected, that would see the USD strengthen even further.

With the Ringgit also being positively correlated with KLCI, the bear market hitting our local stock market has also contributed to the poor Ringgit
performance.

But all is not gloom though, as the bond market is a good alternative to invest. With Malaysia and US bond yields moving closely together, it seems that it will only get higher in the near future. Perhaps everyone is seeking shelter from the current bear market that is hitting the world’s stock market.

But if interest rate hikes are getting more aggressive, it will cause the bond yields to fall. At this point we can look to our local stock market, which has a lot of upsides and liquidity.

Answering a question posed by one of the participants on where to invest in 2023 following the movement of the USD, Suresh answered, “We should first look at the expected US data, whether it will rise or fall. If the USD falls, then the stock market is a good choice to invest.”

But if you take a closer look at the stock market, the S&P 500 might have dropped a lot, but it is still chalking up decent gains over the past few years. As compared to our FBM KLCI which has been underperforming badly.

Even though the USD might be strengthening, our Ringgit has been performing stronger against other major currencies such as the Japanese Yen, Pound Sterling, and Euro.

“The Malaysian market should bounce back by next year, and we are actually doing pretty well,” Suresh optimistically replies when asked about his outlook on 2023.

Our GDP is growing and there’s also an increase in supply and demand in selected sectors.

“It is not about what the new government will be doing, but it is what state the new government will be facing,” said Suresh.

He advised us to be mindful of our risk profile and to diversify our portfolios since there would be a lot of potential once the market recovers. In terms of exports, Malaysia came in second best behind Indonesia, but we managed to beat other countries such as Taiwan, Korea, China, Thailand and even Singapore.

In terms of growth, Malaysia is leading the pack, beating the likes of Singapore, US, Europe and even China.

Read: Are Alternative Investments Right For Me?

We then welcomed our third and final panellist, Jason Wong Jia Jun, CFA and research manager at FSMOne Malaysia to share his thoughts on whether Malaysia is still a good market to invest in.

“From a portfolio perspective, Malaysia is a good market to invest in, due to its low correlation with the global market. Malaysian equities have a lower correlation coefficient with the global equities at 0.54 and the Asia ex-Japan market at 0.38,” he also optimistically answers, relying on good data.

Having Malaysian equities in your portfolio will help reduce volatility and boost risk-adjusted returns.

Even though FBM KLCI is trading sideways, certain sectors have shown good performances such as the financial and energy sector. Local fund managers have also been able to give good returns, as they tend to be able to pick the right stocks – especially in the Small & Medium Cap companies.

Jason also shares his thoughts about Malaysia’s market outlook for next year: “The Malaysian market has been disappointing this year, but we are still doing relatively good against other markets. Next year will be better as the Malaysian economy has been growing at a healthy pace, and next
year our economy will be even better as forecasted by the International Monetary Fund (IMF).”

Fundamentally our companies are expected to be doing better with the solid backdrop of our improving economy next year. Earnings are expected to recover next year with double digit growth as compared to this year.

The financial sector will benefit directly from an increase in Overnight Policy Rate (OPR), and the OPR is expected to rise further. The financial sector will enjoy more than 15% growth in 2023 due to the widening net interest margin and improved investment income, as well as higher bond yields.

Our Malaysian stock market is currently trading at a very attractive level, with the FBM KLCI targeted to hit 1,600 points by end of 2023.

“Yes, there are some turbulences caused by both external and internal factors, but the sentiment will turn favourably once some of the catalysts are in place. This includes a reduction in inflation, the eventual resolve of the Russia-Ukraine conflict, and the reopening of China’s international
borders”.

With the good news ahead, the question on everyone’s minds is: “Should we keep on investing despite the gloomy prospect of recession next year? If yes, where to invest in 2023?”

Jason responded with a resounding, “Yes! We must be greedy when others are fearful.”

Now is a good time to be back in the market, after it has suffered such a big drop. There are a lot of buying opportunities for long-term investors. Apart from Malaysia, the Asia ex-Japan market is also another good opportunity to invest in. The tourism sector is starting to pick up, and we can now see many tourists traveling in and out of Asian countries.

Next up is China, where they are doing the exact opposite of what others are doing. They are currently cutting down on interest rates and coming out with stimulus. The recovery of China will have a positive impact for the Asian region, especially Malaysia as we have a strong link with China. The disappointment in earnings for Asia will be less severe, as the downward impact has been priced-in most major Asian equities. Plus, the valuation is much more attractive due to the massive retracement that had taken place.

Now You Know Where To Invest In 2023?

The panellists also highlighted that the market is nearing its bottom, and next year we should see the market recover. The dreaded recession might not be as bad as we expect it to be, so just hang in there for as little as a few more months or for longer which is at best, another year or two.

You might also want to hold onto your cash, stay liquid and wait it out, as ‘cash is king’. But ultimately, it all depends on your risk profile and the strategy that you use.

Read: Is It Relevant To Be Investing In Uncertain Times?

Quantitative and algorithmic trading is a field in finance that deals with high-frequency trading. A large number of people from all over the world are flocking to this field. It is a highly competitive field and requires an in-depth knowledge of the financial markets, advanced mathematics and coding skills.

Because of their capability to rapidly process huge volumes of information and forecast future market trends, quant traders have seen an increase in development in recent years.

What Is Algorithmic Trading?

Algorithmic trading is a type of automated trading that uses mathematical models to execute trades. Algorithmic trading is a form of automated trading that uses algorithmic techniques to generate, monitor and execute financial trades.

Most aspects of finance have been automated, and securities trading is not any different. Algorithms are intended to help with trading automation, and stock exchanges rely on them. Because of the speed of execution and reduced operating costs, institutional investors as well as big finance companies prefer algorithmic trading.

In these kinds of trades, there is no human intervention. Rather, these trades are carried out in accordance with pre-written guidelines.

The main types of algorithmic trading are:

• Market making
• Arbitrage
• Quantitative Trading
• Statistical Arbitrage
• Mean-Reverting

Read: Stay Away From Crypto Investment?

Importance Of Algorithmic Trading

Algorithmic trading reduces intermediaries, aids in increasing order execution speed and gives traders a sense of security and reliability. As can be seen, the market for Algorithmic Trading is steadily developing and playing a crucial role for traders.

Because of its vast use of statistical equations in strategy development, it aids in making fact-based decisions. It assists in achieving optimal results by quickly and accurately calculating and analysing trade orders. Furthermore, it reduces the reliance on emotions as well as other judgements by making decisions based on data.

It investigates various market indicators and market conditions that influence trading strategies. As a result, it continuously monitors and tracks trading activities in the event of market changes. Algorithms are programming languages that carry out different orders and directions.

It aids in the reduction of manual mistakes that could happen in trading due to a variety of aspects. As a result, it develops and executes strategies based on both historical and real-time data.

It also minimises issues and mistakes that could lead to risks. It accelerates trading activities and facilitates different stages in order to execute strategies on time.

It also facilitates decision-making by employing high-frequency systems which help address intricate math equations.

Read: Correlation VS Causation

Advantages Of Algorithmic Trading

Speed

Even an experienced trader would also require a few seconds to place a trading order. That’s a lot of time for the price to move significantly in this age of high-frequency trading. In that time frame, the algorithm will already have placed and secured thousands of orders.

Human precision and efficiency limitations can cost endless possibilities.

Accuracy

In algorithmic trading, the strategies are accurate most of the time when it comes to dealing with operational aspects of trading. For example, while filling in the order details, humans can commit errors due to loss of concentration or other factors like emotions.

Back-testing

Automation is widely used not only for trade execution but also for strategy validation. To evaluate the performance of any strategy used in live markets, it is tested and tried on historical data. This is referred to as backtesting the strategy.

Backtesting provides critical information about the strategy’s past performance.

Why Algorithmic Trading Is Growing Rapidly?

Algorithmic trading has risen to prominence over the last few years. It is credited with the accomplishment of some of the best functioning and efficient hedge funds. Algorithmic trading, untainted by the emotional state of people and inhibiting response time, executes trading commands rapidly and accurately.

Some of the most crucial reasons why people want to learn algorithmic trading:

• Placing jobs in the field of Financial Technology
• Developing a data-driven approach to trading
• Setting up one’s own algo trading desk
• Reducing manual-related risks in trading
• Risk management

Trading is happening in microseconds and even nanoseconds. A single millisecond accounts for millions of dollars in net sales annually from market trades. Aside from ease of use and customization, some of the many beneficial characteristics of Algorithmic trading include confidentiality, speed, and accuracy.

Conclusion

Algorithmic trading provides traders with numerous opportunities. It broadens horizons in order to achieve the best possible results for trading activities. Furthermore, the use of algorithms results in the systematic execution of trade orders. It also helps to eliminate any psychological or emotional preconceived ideas.

It offers viable alternatives by streamlining tasks as well as executing trades adequately. By undergoing an algorithmic trading course, you can enhance your skills and abilities in trading.

Algorithmic trading is a trading revolution. Furthermore, as a result of Algorithmic trading, traders and their techniques are emerging. Traders use mathematical and statistical methods to devise a strategy for expanding their purview.

As a result of trading breakthroughs, traders must consistently learn and acclimate to a changing market. In consideration of the diverse advancements that drive the industry, it is essential to build skill sets. Traders must also be aware of the advanced technology and variables that influence their financial activities.

Dive into the wonderful world of Algorithmic Trading today!

Read: Fundamental Analysis vs Technical Analysis

The Securities Commission Malaysia (SC) today announced new digital-related initiatives to spur the growth of the capital market and help support the country’s economic recovery.

The initiatives will pave the way for further liberalisation of the capital market and allow Micro, Small and Medium Enterprises (MSMEs) and Mid-Tier Companies (MTCs) better access to funding to grow their businesses.

The new initiatives include opening the alternative financing markets to new players to cater for the growing demands by MSMEs and MTCs.

The SC Chairman Dato’ Seri Dr. Awang Adek Hussin said it is essential to support the post-pandemic recovery journey of MSMEs and MTCs in terms of their financing needs, as well as their continued innovation and growth potential. MSMEs and MTCs collectively contribute more than half of the country’s GDP and are integral to Malaysia’s future growth and economic sustainability.

“Digitalisation of the market is a key priority for the SC so that market participants are able to adapt to digital trends and use technologies which will promote innovation with new business models and products/services including broadening access to market-based financing in a more efficient manner,” he said at a news conference announcing four new initiatives.

The four initiatives are:

A. Scaling up MSME Access to Financing

Since the introduction of the regulatory frameworks for alternative financing platforms such as Equity Crowdfunding (ECF) and Peer-to-Peer (P2P) financing, these market-based innovations have broadened access to capital for MSMEs and innovative new businesses.

As of June 2022, a total of RM3.5 billion in capital has been raised through 41,000 successful campaigns by over 5,400 MSMEs since the frameworks’ inception.

To further harness the potential of ECF and P2P financing platforms, the SC will open new applications for the following:

1. Registration of new ECF and P2P market operators with Shariah solutions and value propositions

The initiative will catalyse innovation in Shariah offerings to further facilitate access to funding needs of MSMEs through alternative fund-raising digital platforms. Building on from the SC’s Islamic fintech accelerator programme (FIKRA), this measure will also enhance Islamic fintech ecosystem and further strengthen the Islamic capital market proposition. It also aims to foster the growth of MSMEs in the halal economy while allowing greater access to investments for all capital market participants.

2. Registration of new P2P operators focusing on the offering of debt-based financing instruments by MTCs and other larger companies.

The capital market plays an integral role in offering tailored and effective funding solutions to catalyse the growth of companies at every stage of their development. This measure will now allow MTCs to seek debt-based financing directly from investors, while reducing the number of intermediaries involved in the process.

Most MTCs have been largely self-reliant in financing their business growth, especially since they have outgrown existing financing avenues for MSMEs but are still too small for traditional public markets.

B. Encouraging innovation and building capabilities through digitalisation

Towards promoting and facilitating greater and faster digital transformation of the capital market, the SC is moving forward with its digital agenda to increase investor participation and develop more synergistic capital market ecosystems. The SC will introduce the following initiatives:

3. Registration of new Recognised Market Operators-Digital Asset Exchange (RMO-DAX) to facilitate regulated digital asset investments

As investment in alternative assets is becoming more prevalent, the SC continues to promote responsible innovation within the digital asset space, while ensuring adequate protection of the interests of investors. This initiative enables investors to invest via regulated avenues and facilitates the entry of platforms with differentiated value propositions.

Currently, there are only four RMO-DAX operators registered with the SC. Allowing more and greater variety of players to enter the market increases capital market vibrancy by widening the number and types of exchange platforms available for investors to invest in, and that is also safe and secure.

4. Establishment of a RM30 million Digital Innovation Fund (DIGID) to encourage digitalisation of the capital market

Recognising the key role that capital market intermediaries play in the evolution of the digital capital market and to invest in the industry’s future growth, DIGID will co-fund innovative projects that utilise technology to enable new and competitive propositions for the Malaysian capital market.

DIGID aims to encourage smaller capital market players to adopt innovative digital solutions and the development of industry-wide solutions impacting capital raising and investment activities.

Interested parties are invited to submit their applications beginning 1 January 2023. Successful candidates will receive funding on a reimbursement basis after meeting agreed-upon milestone deliverables. The funding amount will cover up to 70% of approved qualifying expenses, capped at RM500,000 per project.

Interested parties are invited to engage with the SC on applications for the digital platforms – ECF, P2P and DAX – from 1 November 2022. The updated guidelines and forms will be made available from 15 November 2022.

Information on the new measures, including guidelines and application forms, will be updated on the SC’s website. Interested parties are advised to periodically refer to the SC’s website and future announcements.

Every investment comes with its own risks. If someone told you to invest in an investment that doesn’t have any risk, then you better run away. But what if there’s a way for better investment risk management?

Let’s see at some of the ways to manage risk as per below:

1. Age

Basically the younger you are, the more risks you can take. This is because you can afford to make mistakes while you are still young. But the older you get, the closer you are to retirement age, then you can afford fewer mistakes.

When you are in your 20’s or 30’s, go for riskier investments such as crypto, equities and futures market. Embracing the ‘high risk high return’ concept, you should be able to take on higher risks.

But when you are in your 40’s or 50’s, and with 10-20 years left of working life, then you should be looking at more stable investments that are not high risk and not having low returns. Investing in robo-advisor, ETF, unit trust, REIT can give a rather consistent return if you stay invested for the rest of your 10-20 years before retirement.

Read: Best Tips on Financial Planning for Fresh Graduates

Let’s move on to the next step in investment risk management.

2. Current Family Situation

When you are single and young, you have less commitment and can tolerate more risks. You have a lot of time to learn, study and grow compare to someone who is already retiring.

If you are a young and newly married couple, you should also be able to tolerate more risks towards achieving your financial goals. 

However, couples contemplating divorce and couples with many kids should be more risks adverse and opt for lower risks.

3. Current Income Source

If you and your spouse are both working, then you can invest in riskier investment vehicles for a better investment risk management.

For example, the one with the more stable income, with good employment medical and retirement benefits can enable the other spouse more flexibility and take more risk for higher investment returns. Or you can also consider starting a new business which can pay off handsomely.

But you should also consider your commitments and expect the worse, just in case the investment doesn’t go well.

Whereas for families that only have one breadwinner, you shouldn’t be taking higher risk when it comes to investment.

Read: 3 Ways To Increase Your Source Of Income

4. Extra Cash

The rule of thumb when it comes to investing is that you need to have an emergency fund first. Once you have six months of your monthly salary being put aside, then you can take on higher risks with your investments.

If you don’t have an emergency fund, then you shouldn’t be taking high risks. Think of an exit plan and play out the worst case scenario.

But if you have huge debts, especially credit cards and personal loan, then it is better you clear off the debts with higher interest rates first.

Take for example credit card that charges 15% to 18% per annum, can you find a ‘safe’ investment vehicle that can give you more than 18%?

If no, then it is best if you settle your outstanding credit card debts before moving on to higher risk investments.

5. Protection

Another good way for investment risk management is to take a good look at your protection’s coverage. Make sure that you are well covered for unexpected events such as sickness, hospitalization, disability or premature death.

Ensure you already have sufficient insurance coverage, before undertaking higher risk investments. Because your family can be spared from a financial disaster should something bad were to happen to you.

Read: Should I Give Up Paying Insurance Premiums In Difficult Times?

6. Sleep Easy

The final step in investment risk management, is how well you can sleep at night, and not having to worry about how your investment is doing.

It is not worth to invest in high risk assets when you are concerned about it losing value, let alone losing your sleep over it.

Will you be able to survive should it collapse and you lose all your money?

If the answer is no, then you should be investing elsewhere that can give you a peace of mind.

You Are In Control Of Your Own Investment Risk Management

At the end of the day, you know yourself better than everyone. Once you know your risk profile, then you can better manage your own investment risk management. If anything, do your own due diligence before investing your hard-earned money.

Make sure you understand the risks involved, and don’t only focus on the potential return that it might bring.

Bored of the usual investment vehicles such as stocks, ETF (Exchange Traded Fund), bonds, unit trusts, robo-advisors, properties and the rest? Looking for something else?

With alternative investments, there are plenty of other options that you can consider to invest in. But just like any other investments, don’t just go
diving in without first taking the time to understand what it’s all about.

Warren Buffett reminded us that we must not invest into something that we don’t even understand. Otherwise it will be just like gambling, rather
than investing.

You have to know yourself first, know your risk tolerance, know how much capital that you can invest, whether it is a lump sum or you can invest every month. With this knowledge in hand, you will be able to sleep soundly at night. Because you then understand what investment is all about, the risks involved, and the potential return from the investment over the years.

Why Alternative Investments?

Normally an individual will start looking for alternative once he or she have exhausted the current options. Which usually means that the person
have already invested in traditional investment vehicles such as the stock market, unit trusts and properties. It is mainly a strategy to further diversify their investment portfolio.

Or it could also be that the current investment options that are available could be the investment horizon is too long or the potential returns are not
high enough. There’s no stopping you from going for alternative investments, as long as you know what you are getting yourself into.

Read: 5 Investment Tips For Beginners That You Should Know

What Is Alternative Investments?

One of the popular alternative invesments is peer-to-peer (P2P) financing. It allows entrepreneurs and small businesses to unlock capital in small amounts from a pool of individual lenders. It means that you can borrow money without having to go through a bank.

There’s also equity crowdfunding (ECF) which is an innovative form of alternative fundraising that allows small businesses to raise capital from
the public. As you may have noticed the word equity here, this means that the investors will get some equities, which effectively makes them
shareholders of the company.

Both P2P and ECF are alternative sources of funding that offer access to fi nancing to the micro, small and medium enterprises. They disrupt the traditional banking system by enabling businesses to obtain capital from a pool of investors via an online platform.

The key difference between P2P financing and ECF is that in ECF, you become a shareholder of the company that you invest in.

Of those considering alternative investments, cryptocurrency is currently gaining attention as the most popular asset class. It started with the birth of Bitcoin in 2009, and it has also been referred to as digital gold.

Last year Bitcoin’s performance outperformed every other asset classes and was the biggest winner, however this year, the crypto market comes
crashing down. From its height of US$69,000 in November 2021, to the low of US$17,500 in June 2022, it is defi nitely not for the faint hearted.

Then who could forget how Luna (one of the top 10 cryptocurrency at the time) lost almost 100% of its value in just a few days time. It sent shockwaves through the market and this leads to panic all over.

Read: Crypto Investment: A Very High Risk Game, Are You Sure You’re Up To It?

High Risk High Return

We all heard of the concept, ‘high risk high return’. One of the reasons that alternative investments are gaining popularity, is on the high return aspect of it. But are you willing to take the risks associated with it?

High risk investments can be a part of your investment portfolio as it can help grow your wealth. However, it is crucial to understand the existing
risks involved and decide whether it is aligned with your investment objectives. Finally, remember not to put all your eggs into one basket to ensure
you minimise risk to your capital.

Do take note that your risk profile, commitments and requirements may also change throughout the years and you may want to adjust your investment portfolio and exposure to high risk investments accordingly.

Read: Serving The Underserved MSMEs Market With Digital Financing Investment, Now With Guaranteed Returns

With the rise of inflation and higher interest rates, it presents a challenge to investors all over the world. It is also challenging to find good investments these days.

Smart Investor spoke to Datuk Wira Ismitz Matthew De Alwis, Executive Director & Chief Executive Officer, Kenanga Investors Berhad to find out more about the challenging global equity markets as well as his thoughts on alternative investments.

Navigating The Challenging Global Equity Markets

Smart Investor: What are the challenges that you and the investors are currently facing, now that we are witnessing the rise of inflation and higher interest rates?

Datuk Wira Ismitz Matthew De Alwis: Global equity markets have been particularly challenging in recent times, due to rising inflation, monetary tightening and geopolitical conflicts. As the post pandemic re-opening has progressed across the globe in 2022, many have felt the effects of higher infl ation due to the clash between a rebound in demand and supply shortages.

The global equity market was further weakened by the Russia-Ukraine geopolitical conflict. In response, central banks have tightened monetary policy in an effort to control the rise in inflation. These factors have negatively affected asset prices, as liquidity is drained from the system and the cost of capital increases.

Globally, companies have been affected by high inflation rates through both rising cost and lower demand as consumers scale back on discretionary spending. Local companies were also impacted, especially those companies with export-based revenue and those that have imported raw materials. Additionally, rising risk aversion also dampens fund flows and general investor sentiment.

Generally, we have adopted a defensive portfolio stance in light of the challenging global equity market, with over-weights on sectors that have pricing power, resilient demand and will also benefit from higher interest rates. These include selected companies in the financials, consumer and industrials weakness as an opportunity to deploy capital to companies where long-term fundamentals still remain solid such as the technology sector.

SI: Is it still a good time to invest in stocks or unit trusts, despite the challenging global equity market? How to select the good ones to invest for long term?

IMDA: Unit trust funds remain an excellent choice of investment as it has a low entry point, provides diversification at a reasonable cost, and is usually expertly managed by licensed professionals. There is also an abundance of choice when it comes to unit trusts as investors can select their pick based on their risk tolerance and investment objectives.

More recently, due to the surge in interest towards impact investing, investors have also begun to divert their attention towards businesses that aim to generate specific beneficial social or environmental effects in addition to just financial gains.

Aside from that, factors such as fund strategy, asset allocation, and sector allocation will also come into play during the investment decision process. Ultimately, investors should perform their own due diligence on all the variables laid out in front of them, and make an informed decision to pick the investment tool that would best suit their own personal objectives.

SI: Why would anyone be interested to invest in alternative investment such as P2P, ECF and crypto?

IMDA: Alternative investments can offer investors several traits that are not commonly found in traditional investments such as equities or bonds. These typically include one or more of the following attributes: long term, high risk, or illiquid investments that are associated with higher returns; low correlation with traditional assets to deliver diversification benefits; inflation-hedging benefits; and scalability.

Alternatives will be able to encompass a wide range of asset classes, including private equity real estate and private equity infrastructure funds, secondary funds, and private debt funds. Just like the traditional counterparts, alternative investments also differ from each other from its volatility, risk, and returns.

Cryptocurrency is the current trending topic no matter the age group from millennials to experienced investors. It is especially popular due to its nature (low fees, unaffected by fluctuating interest rates and a global market place without geographical restrictions) and the rise of popular tech culture in the media. Its rising popularity can also be attributed to its innovative blockchain technology, which promotes extreme security for its users and offers unrivalled transparency in the case of its fully auditable and accurate ledger of transactions.

On the other hand, it is also widely famous for its outrageous volatility, as seen in the recent meltdown of TerraUSD (one of the world’s largest stable coins) which is seen as the less volatile variant of cryptocurrencies**.

My most repeated advice to anyone wanting to dive into any forms of investment is to always conduct their own research regardless of experience level, as it is their own money and their sole responsibility to know where it is being invested into. Tune out the noise in the market and focus on reputable news to formulate your own conclusions. Consistent self-education is one of the most powerful tools anyone can practice as it enables us to not solely rely on third-party information which may or may not provide us with a false sense of the market.

**Source: https://www.wsj.com/articles/terrausd-crash-led-to-vanishedsavings-shattered-dreams-11653649201

SI: What does Kenanga Investors have to offer in terms of alternative investments? Is this something that the company has yet to explore?

IMDA: As the alternative investments pioneer within the Malaysian market, we are able to offer sophisticated and diversified investment instruments for the modern-day investor. From the conservative to the more dynamic investor profile, our alternative instruments are an additional source of uncorrelated returns, the key to success being a delicate balance of the right manager and the right strategy in line with one’s investment profile.

For Kenanga Investors’ Alternative Investments, we do look at various opportunities and asset classes. E.g. private equity (direct investments into private companies), wholesale funds (launch of Kenanga Sustainability Series, with the most recent being the Kenanga Sustainability Series: High Yield Bond Fund, the Kenanga Global Unicorn Series and the Kenanga Global Multi Asset Fund) and asset-backed high-yielding notes.

From investment advice to bespoke alternative investment portfolio management, our expertise lies in alternative strategies with varying degrees of liquidity to complement or bolster an investor’s existing portfolio.

We are confident that our growing presence within the alternative space has added depth to the products and services offered to our investors, enabling both retail and institutional investors to capture market opportunities in a volatile environment.

SI: With so many legitimate investment schemes out there, why do you think people still fall for scams?

IMDA: Some people still fall for financial or investment scams regardless of the amount of legitimate investment schemes due to one crucial factor, lack of patience. They are often discouraged by the slow process of capital gains or accumulation of returns in legitimate investment schemes.

Therefore, when a get-rich-quick scheme presents itself, they often fall to temptation and suffer high amounts of losses to their valuable savings. These scams often exploit the human weakness of instant gratification where they promise quick and higher returns.

SI: What are some of your plans in the near future?

IMDA: Since 2021, we have steadily been releasing a series of funds that follows Kenanga Investors’ sustainable and socially-responsible investing roadmap such as the Kenanga Waqf Al-Ihsan Fund and our suite of multiasset products, Kenanga Sustainability Series. The Series was conceptualised in wake of the ever-growing demand for ESG adoption among companies by investors, especially post pandemic.

We are excited for the future as we will be introducing fresh new funds in the KSS line-up which will further provide our investors with a more robust portfolio stemming from ESG analytics which captures new opportunities aside from standard qualitative and quantitative metrics. In respect of this, we are also looking to enhance our Shariah-compliant investment experience by adding value-added products and services to stimulate the local impact investing landscape.

Alongside our intention to have more ESG products in our lineup, we will also be looking at converting existing selected funds (both global and domestic) to meet the threshold required to qualify as ESG relevant.

With multiple successful product launches, a dedicated team of professionals in deal sourcing and idea generation, and an intricate network of relationships with expert alternative partners all over the world, we have achieved what we set out to do, bridging the gap between retail investors and more sophisticated forms of products which were previously only available to institutional or accredited investors.

Everyone loves it when it comes to investing. Seems like we can never get enough of it, although our capital might not be that big. Here are some investment tips for beginners that you can apply for a steady growth despite the market’s uncertainties.

1. Set Your Goals

They say if you fail to plan, then you are planning to fail. The first investment tips for beginners, is begin by listing down all your financial goals such as:

• Saving up for a property
• Retire at age 55
• Sending your child to private university
• Travel the world

Everyone have their own goals in life. Be specific with what you want, and allocate the funds to each goals.

For example you need:

• RM100,000 as down payment and renovation costs to purchase a property
• RM5,000 per month living expenses each month when you retire
• RM100,000 as tuition fees and living costs for your child when entering university
• RM100,000 fund to be used to travel to Europe and United States during the summer

Read: Best Investment In Malaysia

2. Dollar Cost Averaging Or Regular Savings Plan

According to a research by Morningstar, investors who stayed in the market for all 5,035 trading days achieved a compound annual return of 6.1%. However, that same investment would have returned 2.4% had it missed only the 10 best days of stock returns.

Further, missing the 50 best days would have produced a loss of 5.5%. Although the market has exhibited tremendous volatility on a daily basis, over the long term, stock investors who stayed the course were rewarded accordingly.

That’s why it is important to invest regularly either each week or each month instead of trying to find the best time to go in the market. Because even the most seasoned professional investors can’t get the timing right, what chances do we have?

Even when faced with an uncertain market, the best thing to do is keep on investing. Allocate a certain amount from your salary to invest. A good figure to start is 10%, if your salary is RM10,000 per month – make sure you invest RM1,000 each month.

3. Portfolio Diversification

“Don’t put all your eggs in one basket”

This words of wisdom can’t be much further than the truth, and is very important as one of the best investment tips for beginners. You should be diversifying your portfolio into several low-risk instruments with low returns, medium-risk instruments with medium returns, and high-risk instruments with high returns.

Still remember the RM1,000 per month investment that you are allocating each month, which is 10% of your salary?

You can split it into:

• RM250 into crypto
• RM250 into equity (stock market)
• RM250 into REIT (property)
• RM250 into fixed income (fixed deposits)

Crypto and equity are high-risk investments, REITs are medium-risk while fixed income are low-risk.

Read: Follow These 5 Steps For An Effective Asset Allocation In Your Investment

4. Focus On Fundamentals

Either crypto or stocks, you should be looking at those with great fundamentals. For crypto, the stablecoins are the ones to invest for long term, Bitcoin, Ethereum, Binance Coin (BNB), Ripple, Solana are good choices.

Bitcoin is the grandfather of crypto, Ethereum and Solana are mostly used for NFT, BNB being used on Binance the world’s largest exchange, while Ripple are used for real-time gross settlement system, currency exchange and remittance network.

As for stocks, you can use one of the most popular fundamental analysis – 5 Magic Numbers:

1. Earnings Per Share (EPS)
2. Price-to Earnings Ratio or P/E Ratio (PE)
3. Return On Equity (ROE)
4. Net Tangible Asset (NTA)
5. Dividend Yield (DY)

By using the 5 Magic Numbers, you will be able to filter companies with resilient earnings, strong track record and ability to pay dividend.

5. Invest For Long Term

The final investment tips for beginners, is that I can’t emphasize enough on the importance of investing for long term. Instead of looking for short term gains, have a more longer term view when it comes to investing.

Ignore all the hypes of current investment that is making waves, instead go for the tested and tried instruments. All investments have their ups and downs, and if it can go up very fast, it can also go down in a flash.

Read: The 4 Stages Of Side Hustle For A Bigger Investment Capital

5 Investment Tips For Beginners

Well there you go with some of the best investment tips for beginners that you can probably use as part of your investment strategies. Just be patient and keep on investing regularly, you should be able to reap what you sow and meeting your financial goals.

“Wen lambo?” or “Wen moon” are just some of the phrases that is quite common in the crypto world. It is a way to ask crypto investors on when they are going to get rich with their crypto investment. The misspelling looks cool in a way, but investment is actually serious business.

Crypto investment is considered to be a very high risk investment with a very high potential return, the question is do you really want to invest your hard-earned money into it?

Fancy yourself a return of 16,000% per year? It is possible with crypto investment, in fact there were two cryptos that managed to achieve this staggering return on crypto investment in 2021.

Imagine putting in RM100 in 1st January 2021, your crypto investment would be worth RM16,365 by 31st December 2021. Now imagine investing RM1,000, by the end of the year the crypto investment in The Sandbox will be worth RM163,653.

Sounds too good to be true, right? But that is what happened last year.

99.99% Loss In 2 Days

On 9th May 2022, the whole world was shocked when Luna comes crashing down – losing 99.99% percent of its value in just 48 hours. Who would have thought that Luna was once a top 10 cryptocurrency in terms of market capitalisation, would be brought down to its knees in a way that was unimaginable.

Well, that’s crypto for you. You can make big money, and you can also lose it all. We managed to talk to a few financial planners for their advise on crypto investment.

“I won’t advise my clients to invest into crypto investment unless they are higher risk investor and I see they are matured enough for this type of investment. Normally even if they are, we would work out a small portion of their assets or net worth to be invested in alternative investments, which is not more than 10%,” says Ng Ka Hoe, Founder of J Advisory, a personal finance academy.

Before You Start Investing In Crypto

According to Ka Hoe, he would ensure that his clients understand the following before embarking on their crypto investment:

• What are the alternative investments’ underlying assets?
• What are the risk involved?
• Have they invested into traditional investments such as property, stocks and unit trusts? If they haven’t, why not?

It is important not only for the financial planner to understand what makes their client’s emotional ticks, but it is more important for the client
themselves to know and understand their own emotions, as it is truly the investor’s emotions that makes or breaks their investment.

Don’t Go All In With Crypto

Essentially, crypto assets are assets that are non-income generating but more for the crypto investment objective for capital gain. While it is undeniable that crypto currency has helped make many new millionaires, for this wealth to be sustained into the future, one may want to explore how this new wealth can be protected or kept, so that even if the value of the asset class reverses its course, this person will not be knocked back to the ‘pre-crypto’ life.

“Of course, it is perfectly fine if we remain having 100% of our wealth be invested in crypto assets. However, that will also mean we tie our future
financial health and possibility in life to a single asset class,” opines Kevin Neoh, a licensed financial planner and NextGen Money Coach.

Don’t Invest In Crypto

Meanwhile there are also opinions on the other side of the fence that warns against investing in crypto.

“Ask yourself when it comes to crypto, are you investing, trading, speculating or gambling?” says John Chan, CEO of YES Financial, a financial advisory firm.

Apparently, we ourselves are confused with the terms. Trading or investing in crypto may incur a significant level of risk, even worse if you are using an unregulated or an unlicensed platform.

Conventionally, when a person is betting on horse racing, they will tell you all sorts of stories and logic with regards to horse riding. When a person is speculating on crypto, they may tell you all kinds of fintech and futuristic tech stories about blockchain or even the recent hot topic of Metaverse and NFTs to push up prices.

In conventional gambling, there are licensed casino and the underground operators. Why do some governments grant casino a license? The most common reasons are due to profit making, demand and the need to safeguard public interest through monitoring and control.

The Myth Behind Decentralisation

Everyone wants to have freedom, and nobody likes to be controlled. Some level of freedom is good but it would be a disaster if there is absolute freedom.

Imagine that you are living in a place with no government in power What would be the scenario?

“When there is no effective government, there are bound to be warlords or mafias controlling the area. Is it a safe place to stay then?” mentions John.

Instead, there would be chaos all over as everyone will be fighting for power.

Scarcity, Really?

Bitcoin is called Digital Gold as there is a maximum supply of 21 million Bitcoins. This means that Bitcoin has a unique feature of scarcity. This is
where people seem to illustrate the scarcity of Bitcoin to Gold, as there is a limited supply of Gold available on our planet.

However, gold exist and play its role in civilization since ancient times as precious metal, jewelleries, commodity, storage of value, medium of transfer, barter trade, technology components, currencies etc. It is kept by government and central banks as reserves.

“Gold is a natural resources and is not created by human beings. Unlike cryptocurrencies that are created by humans and there are now more than
19,000 cryptocurrencies in existence,” shares John.

Ask yourself, is ‘scarcity’ real then?

Crypto As Legal Tender?

According to BIS Annual Economic Report 2018, for cryptocurrencies with decentralised trust model such as Bitcoin, each user needs to download and verify the history of all transactions ever made. This has the effect of slowing down transaction processing time, making it not scalable to facilitate day-to-day retail payments.

Compared to major international cards networks which is able to process 2,000 to 3,500 transactions per second, Bitcoin is only able to process 3.3 transactions per second.

“Most cryptocurrencies are not likely to be used as payment instruments primarily because they do not exhibit the universal characteristic of money. Not to mention the price volatility, vulnerability to cyber attack, lack of scalability, not a good store of value, payment method and medium of exchange,” John emphasized.

As of March 2022, 87 countries are exploring the issuing of Central Bank Digital Currency (CBDC), according to the Atlantic Council. While CBDC may
adopt blockchain or Distributed Ledger Technology (DLT), CBDC differs from normal crypto as CBDC is legal tender and is backed by a claim on the central bank. Unlike cryptos that are not legal tender and have no intrinsic value.

Bank Negara Financial Sector Blueprint 2022-2026 stated that they are looking into CBDC through multiyear exploration, starting with Phase One via Project Dunbar.

Asset Allocation Is Important

At the end of the day, there is no one investment that suits everyone. It will be best if you diversify your investments into several asset classes, such as stocks, properties, unit trusts, robo-advisors, fixed deposits, bonds etc.

There should be a mixture of low risk investments with low returns, some in medium risk investments with medium returns, and some in high risk
investments with high returns such as crypto investment. Because you never know with crypto, you can go big but you can also go home with nothing.

Think about it. When are times ever ‘easy’? At the time of writing, we face inflation, COVID-19, wars, trade tensions, the ups and downs in interest
rates, currency exchange rates, and commodity prices.

On top of all that, there is the ever-evolving political, economic, and social instability around
the world. It only makes sense to say that ‘uncertainties’ is a certainty in present times.

So, is it still relevant to be investing in uncertain times?

Well, it depends. Some may react by not investing altogether. But that approach is likened to an ostrich burying its head in sand. It is impractical. Today, the awareness to invest has largely increased among the general public.

However, investors may lack a plan to navigate their investments through the stormy seas of the markets today.

Here, I have observed two different approaches to navigating the market and investing in uncertain times. They resulted from having a different mindset towards investing.

Read: 5 Investing Mistakes to Avoid During a Downturn

Let me explain:

Approach 1: Market Predictions

This refers to investors who believe that wealth is about having more money. To them, if they invest in an investment, be it stocks, properties, ETFs, cryptos, so on and so forth, and its price had appreciated, they will consider it to be a good investment.

If its price had fallen, it would be deemed as a failure. Thus, it is common for them to measure investment success based on the following:

Price Goes Up = Good Investment

Price Comes Down = Bad Investment

Hence, they tend to invest during good times, as prices of investments tend to rise in line with heightening optimism. Also, they would avoid investing in uncertain times due to falling investment prices. Some would sell off investments as they have a pessimistic outlook on the future.

In extreme cases, this could lead to manias and panics in the investment markets. Basically, their guiding principle is to buy in good times, sell in bad times.

So, how do they know where the market is heading in the future?

Well, the answer is to try predict the markets. Many would speculate. Some will be checking on the macros and technicalities if they are more sophisticated.

Generally speaking, they are always trying to find the ‘best time’ to invest or to dispose of their investments. To me, that is trading or speculating.

If you are in this group, you will always be anticipating if today or tomorrow may be a ‘better time’ to invest. Even after you have invested, you would always want to find out when would be the ‘best time’ for you to sell off your investments.

That is not my approach when it comes to investing in uncertain times.

Read: Are High-Risk Investments Suitable For Me?

Approach 2: Income Productivity

Unlike the aforementioned approach, this group of investors believe that wealth is about owning assets that are income-productive. Thus, the measure of investment success would be based on the income productivity of the assets.

The more income they produce over time, the more successful the investment.

Income Rises Over Time = Good Investment

Income Falls Over Time = Bad Investment

For this group of investors, they are focused on the assets’ fundamental quality. They want to know if the asset can generate more income in good and bad times.

To them, it does not matter if the stock market, the economy, the Ringgit and the interest rates are going up or down. What matters is this: Is the asset in consideration profitable and sustainable in all economic conditions, particularly in tough times?

By focusing on income productivity, this group of investors would tend to invest differently from the market predictors. Normally, in good times when asset prices are rising, this group of investors would have difficulty in finding income productive assets that are offered at attractive valuation.

Thus, they invest less in good times. This would be different in tough times when asset prices are falling. In this situation, this group of investors will have an easier time acquiring such assets at discounted prices. So, they invest more in bad times.

Therefore: “The answer lies in your belief system when it comes to investing in uncertain times.”

Buy Less / Don’t Buy = Good Times

Buy More = Bad Times

If you are in this group, you would have less tendency to do market predictions. Instead, your focus is on the asset’s fundamental qualities and its valuation, which makes predicting market movements irrelevant.

So, should you be investing in uncertain times?

The answer lies in your belief system when it comes to investing. As for myself, my interest is in the accumulation of fundamentally strong stocks, if they are offered at attractive valuations. This is because I believe wealth is about the income productivity of my assets and thus I had invested accordingly.

If your beliefs on wealth are different from mine, you would invest differently. Ultimately, it is up to you to be navigating the market and be smart when it comes to investing in uncertain times.

Read: 9 Reasons Why You Should Invest For Dividend Yields

About the Author

Ian Tai, Financial Content Machine. Dividend Investor. Produced 200+ Financial Articles featured in KCLau.com in Malaysia. Co-Founded DividendVault.com, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.