Category: Investments

Australians lost AU$158mil to investment scams in the first quarter of 2022. Malaysians have suffered the same fate with more than RM2bil lost through scams since 2017. The figure is potentially higher since there were many cases that have not been reported.

V. Thanga Velu @ VP Thanga, Executive Director and a Financial Planner at Blueprint Planning Sdn Bhd shares that most of the scam’s victims wanted to achieve their shortfall with the highest return. Besides, scammers are now getting smarter and more creative blending in with the people.

We seldom conduct our own research on whether the investment is legitimate. The other thing that Thanga emphasizes is that the government should impose severe punishments on the scammers. For example, longer jail terms and the seizure of their assets. 

Normal people without a finance or investment background may not know how to classify or identify whether an investment is a scam. 

“Legitimate investments tend to have lower returns and more paperwork such as Know Your Client (KYC) or fact findings to participate in the investment, which may not be attractive and troublesome to some people. If an investment is convenient, provides high returns and no questionnaires are needed, think hard, think long before making that decision as it might just be another scam,” Desmond Foo Wai Kheong, Practice Director of UOB Kay Hian Wealth Advisors Sdn Bhd explains. 

As a rule of thumb, if it is too good to be true, you should consider getting a second opinion before investing your hard earned money. 

With the rise of social media, a lot of financial gurus and influencers are now giving out tips. Some of them are legit, while some may take advantage of their followers. There were a few social media investment scam cases that were reported. 

But how do the public filter all of the information given by the gurus or shared by the influencers so that they won’t fall in the trap?

Nick Lim, a Licensed Financial Planner at I-MAX Financial Sdn Bhd shares that we need to assess the person dispensing the financial advice whether they are qualified. Check this person’s track record and ensure that verifiable facts support everything being shared. 

Senior Vulnerability

In a survey led by the International Organization for Securities Commissions (IOSCO) which represents more than 150 countries’ securities regulators including Malaysia, it found that the senior investors in particular face greater risk of becoming victims of fraud, being misled or taken advantage of.

The 2018 survey which focussed on seniors, defined as those in or nearing retirement, highlighted the rising financial fraud on the elderly across the globe.

As investors age, they may face new challenges such as cognitive impairment due to health and age reasons as well as mental health issues arising from greater social isolation. For some senior investors, these challenges are compounded by a background of limited education and financial literacy – all of which can affect their judgement and decision-making capacity when it comes to investments. 

According to the Securities Commission, this is already apparent in Malaysia – senior citizens are often targets of various syndicates, ranging from phone scams and sweepstakes to more complex scams which involve impersonation of figures of authority. Most scams or fraud activities target the life savings of these senior citizens, regardless of net worth, and take advantage of their vulnerabilities.

The growth in digitisation has also exposed vulnerabilities among investors who lack the knowledge to protect themselves in the digital age.

Beware if It’s Too Good To Be True

The reason that most of us fall prey to scams is due to us being gullible to get rich quick and forget that investment is a long term game.

Some of the more popular scams are the ones that promote non-existent investment schemes that promise high returns with little or no risk within a short span of time. Have you seen an ad that says, “Invest RM1,000 and get RM10,000 within 24 hours”?

Ask yourself, is it too good to be true? If it is, then you should be very careful and avoid it at all costs.

Scammers have also been known to use fake certificates, invoices and payment receipts from authorities such as the Securities Commission Malaysia (SC), Companies Commission of Malaysia (CCM), Bank Negara Malaysia (BNM), and Inland Revenue Board of Malaysia (LHDN). We tend to feel safe if it is endorsed by the authorities, and wouldn’t question them on the legitimacy of the documents.

There is also a rise in clone firm scams, where clone firms pose as legitimate entities by using names, logos, credentials, website and other details of legitimate entities to promote bogus investment schemes. At a glance, it looks very similar between the two. If we are not careful, we will think that it’s the real deal.

Always take some time to research any financial tips, to evaluate if that tool applies to oneself. Keep this in mind, we are the decision-maker and there will be nobody else to blame but ourselves if things don’t turn out well. Ultimately it is always advisable to deal with a licensed personnel.

Malaysia’s mandatory retirement age is now at 60 years old. It can either be a good thing or worrying, depending on whether a proper planning has been done prior to retirement.

For most of us, the main savings for retirement would be our contributions to the Employee’s Provident Fund (EPF) or other equivalent retirement fund. But as statistics have shown, it is inadequate to maintain the quality of life we were used to before retirement.

Many would take a step further and seek advice from a Financial Planner to see how they can enhance their planning by growing their wealth through investments. With so many options available in the market, many have been blind-sided about one particular issue.

Retirement planning is more than just saving enough money to generate a passive income that covers your post-retirement living expenses and healthcare.

Regardless of how you save or how much you save; you need to think about a situation where you or your family members may not be able to access your savings. What if you are comatose or is suffering from dementia, and are not able to take care of yourself during old age? Or perhaps another pandemic like COVID-19 happens?

You may have a family to take care of, but they will need access to your savings. They would not be able to do so if they are not authorised to operate your account.

Planning for retirement is not just about making sure you have enough to live, but also about providing for contingencies that can happen.

A well-planned retirement covers planning in many aspects, from financial to healthcare arrangements to estate planning and even bereavement care. Proper planning could save your family from a lot of heartaches and financial pitfalls. Rather than just merely saving for retirement, you can further enhance your retirement planning by using a Trust.

A trust is like a water tank that you have installed in your house. Your house’s water supply come from the main pipe. Although the supply is supposed to be continuous, it is only a matter of time before a shortage can happen. This is where your water tank comes into use by continuing your water needs in such an emergency.

This is how an investment or insurance trust from Rockwills can help in your retirement planning.

This type of trust provides liquidity in times of need during your retirement. In the trust structure provided, you need not transfer the asset yet until the events that were predetermined by you happens. Such events could be Total Permanent Disability (TPD) such as being comatose for a period of time, critical illness, and mental disability.

Rockwills as your appointed Trustee will then utilise the trust funds to take care of your financial needs, such as medical expenses and even your living expenses while you are under nursing care. This is very useful especially for those whose children have migrated overseas and are no longer around to help.

In summary, you need to build a safe where you can keep piling up your life treasures; and when the need arises, your dependants are able to access it. You will then need someone who can act as your trustee with a backup key to access your funds and carry out the distribution instructions. By setting up a trust, you will be protected in case of unforeseen events and that will only mean a safer future for you and your family.

Rockwills can help you plan to ensure that your retirement planning objectives can be achieved. Established in 1995, Rockwills is the specialist in providing comprehensive Will Writing, Will Custody & Trust services. We are one of the largest estate planning groups in the region, having written more than 280,000 Wills, 12,000 Trusts and holding over RM25 billion assets under Trust.

“Fintech for inclusion” seems to be on everyone’s lips and countless articles have been written on advancing the benefits of fintech for the underbanked and underserved segments. Undeniably, many of us, to a certain extent, may have already benefited from the adoption of fintech, from payment to data-driven investment in consultancy services.

With more intense competition between the major players, it would translate into better services at a lower cost.

However, the term “customer loyalty” and “customer satisfaction” may no longer apply in this era of digitalisation. Customers may not be loyal although they are satisfied with a particular service provider.

Seamless easy experience remains the utmost important factor for customers in their selection of a service provider. In other words, a service provider may face the risk of losing its customers at just the slightest inconveniences from technical glitches in their platforms.

This explains why fintech providers are so obsessed in improving customer experience particularly in the area of digital on-boarding in their services. Palatable decent services is no longer good enough but services that intrigue and keep customers delighted may help to retain them.

Investing With Fintech

On the investment front, customers may be inclined to prioritise investment returns over convenience. Thus for investment platforms, they may stop utilising the platform if it fails to generate enough returns according to the users’ risk profile or risk appetite.  Conversely, they may still utilise the platform, even if it is complicated, as long as the provider could deliver some ‘magic figures’ for their investment returns.

So, with a myriad of fintech systems that can help us to save, borrow, plan, trade, invest and automate our portfolios along with alternative investments and in emerging asset classes such as Decentralised Finance (DeFi) – cryptocurrencies and Non-Fungible Token (NFT), could we invest better with fintech?  Could we make more profitable returns compared to our predecessors or to those who are reluctant to embrace the technology?

Studies have shown that humans are not always rational especially when it comes to investing. Digital assisted investment tools can help us invest with less emotions and make better fact-based decisions. For instance, with the advancement of fintech applications with Artificial intelligence (AI), we could preserve the value of assets with the right risk-management techniques. Market sentiments for a particular asset or asset types could be gauged with the help of fintech applications in analysing and interpreting into human language by looking into their preferences, their opinions, what they say, likes or dislikes.

However, whether the tools can be harnessed for better investment decisions depends on how smart we are in utilising it. The increased amount of available information together with fake news daily, may result in ‘illusion of control’ over our investment abilities or ‘illusion of knowledge’ over the capacity of fintech platforms for investing.

Such psychological biases could lead to excessive financial risk-taking that inadvertently results in less than optimal investment decisions when we underreact or overreact to information. Overreaction and under-reaction to information are due to our brain’s tendency to use shortcuts when processing large amount of information as detailed in the psychological literature.

Trying to avoid the ‘falling out of herd’ mentality is another type of bias commonly experienced when making investment decisions. This can then lead to domino effects of ‘false consensus’ and ‘momentum bias’ when making decisions.

‘Investing is most intelligent when it is most business like’ and ‘Be fearful when others are greedy’ are perhaps the famous quotes by Warren Buffet that we have to remember when investing. We can only consistently beat the market and earn a return only if we are smarter than the market. Hence, by just emulating the trading strategies of others or adopting their software could make us as smart or as silly but not necessarily smarter than others.

No matter how sophisticated or data-driven the fintech platform is, the ability to discern real from fake news is also critical. We are essentially living in a big machine under digital surveillance daily, with tons of information produced daily from the moment we use electronic devices.

With increased competition, major players may be heading for more partnerships and initiatives such as Open-Banking, to share and leverage our data in providing a more customised application and solution for us.

After all, fintech is also a tool that feeds on data. The right investment action for better investment outcome could not be possibly extracted from a large amount of garbage.

Yet, being not digitally exposed may also mean becoming more digitally vulnerable to financial scams. Thus, it is important to invest in oneself by acquiring knowledge and skills, while undertaking finance and non-finance related risks that are brought about by rising fintech development. 

In short, too much of something is never a good thing; just like consuming too much vitamins or supplements may be bad for our health. There is no perfect formula or system for investing in this world.

We should not forget that many market crashes like Black Monday in 1987 and the liquidity crunch in August 2007 are in part due to mechanical glitches.

About the Author

Dr Audrey Lim Li Chin is a lecturer and a researcher at Multimedia University (MMU) Melaka. She teaches International Finance and Derivatives. She is particularly interested in retirement planning, mental health, fintech especially in blockchain and data analytics. She is also a Certified Financial Planner, (CFP) and is currently pursuing Chartered Financial Analyst (CFA) certification. She is also the external educational advisor to Max Wealth Education Sdn Bhd.

This article is in collaboration with Max Wealth Education Sdn Bhd, an approved Education Provider for the CFP Certification Program.

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A market downturn can be scary. In the past few months, we have seen one of the most volatile swings in stock market history that can unnerve even the steeliest investor. But many forget that we have been through this before.

Whether it is selective memory or a case of financial amnesia, many investors might give in to their worst instincts which often leads to poor investment decisions. Here are five common investing mistakes to avoid that could set you back even further in a downturn.

1. Panic Sell

It can be painful to see a sea of red in your portfolio. But giving in to fear and panic selling would only crystallise your losses and making them permanent. Instead, take a long-term view of your portfolio by realising that markets move in cycles and that downturns are temporary.

History shows that each bull cycle tends to end higher than the previous top. For example, during the 2008 crisis, global markets plummeted as the subprime meltdown spread carnage around risk assets. However, the markets found its bottom in March 2009 and eventually recovered to former levels and goes even higher.

More recently in March 2020, stock markets cratered as the COVID pandemic shuttered the global economy with the MSCI World Index plunging by 34% in a span of 6 weeks. However, the recovery was equally swift with benchmark gauges retracing back their losses in April and notching new highs since then. 

2. Trying to Time the Market

Another common mistake is that investors may attempt to time the bottom by selling entirely and then piling back in when markets start to rebound. Unfortunately, investors even professional ones rarely get both the timing right and ended up in a far worse position than they were before.

Instead, practice dollar-cost averaging by continuously investing in fixed sums through regular intervals. This helps lower the purchase price of your investments over time by taking advantage of market dips as well as reducing the risk of bad timing or investing according to one’s emotions.

3. Did Not Rebalance

Investors are advised to rebalance their asset allocation at least twice a month to correct portfolio drifts back to its target allocation. However, a major market movement such as a downturn could also throw it off balance.

In a downturn, the returns from an equity portfolio would tend to fall much more than the target allocation as global stocks are down. Jittery investors may neglect to rebalance it back and increase their exposure in equities because they are worried of the volatility in the markets.  After all, it sounds counterintuitive to invest when market conditions are shaky.

However, it is important to do so in order to stay on track towards achieving your long-term goals. Rebalancing is also important to ensure that you are taking the desired level of risk that you have set out in your investment plan.

4. Cutting Your Winners and Hanging on to Your Losers

An important investment maxim is to ‘ride your winners and cut your losers’ from your portfolio. It sounds logical, but during a downturn, investors tend to do the opposite as they attempt to stem losses. Thus, they lock-in gains from their winners in order to compensate for losses in other areas of the portfolio.

But this only digs a deeper hole for the investor who could be worse-off in the future by hanging on to the portfolio’s losers. Instead, establish clear parameters for corrective action where needed in your investment plan to avoid mistakes such as these.

5. Monitoring and Doing Too Much

In a downturn, investors are often plugged-in to news alerts and social media to keep up-to-date with what is going on with the markets. This could prompt investors to buy, sell and sometimes even take advice from unscrupulous ‘financial gurus’ with a hidden agenda.

Looking at your portfolio 24/7 and tinkering with it too much does not usually end well for the investor. Financial anxieties kick-in and you start to lose sight of your goals which includes why you have decided to invest in the first place.

Learn to filter out the noise and take every sensational headline with a pinch of salt. Media outlets rely on eyeballs for advertising revenues and clickbait articles are their go-to tactic.

Instead, stick to your investment plan through regular contributions and practice diversification. Ensure that your portfolio is geared towards it stated purpose with an asset allocation that matches your risk tolerance. 

Keeping Perspective

The first rule in any market downturn is to stay calm. We may not always be in control of any given situation, but we can control how we respond to it.

This is especially true for investing where success has little to do with how much you know, but rather how you behave. Thankfully, it mostly involves inaction, staying the course and lots of patience.

About the Author

Lee Sheung Un is a communications officer at Affin Hwang Asset Management. A millennial, he is still finding that balance between wealth, freedom and purpose. Views expressed are his own.