Category: Investments

“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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Shariah investing is a very popular buzzword and Malaysia is the world’s leader in Islamic finance industry.

Smart Investor spoke to Ruzi Rani Ajith, chief executive officer of CGS-CIMB Securities Sdn Bhd to find out more about Shariah investing and the inaugural CGS-CIMB Regional Shariah Investing Symposium 2022 which was held in Singapore recently.

Themed Sustainability & Shariah: Investing for a Brighter Future, the symposium brings together experts from across Malaysia, Singapore and Indonesia to discuss the latest developments in Islamic Finance and Shariah Investment. Top management from leading Shariah-compliant companies listed on Bursa Malaysia, the Singapore Exchange and the Indonesia Stock Exchange were present to share their future strategies and growth plans post-pandemic.

Smart Investor: Hi Ruzi Rani Ajith, thanks for taking the time to have this interview with Smart Investor. Perhaps we can begin with a brief introduction about yourself?

Ruzi Rani Ajith: Hi, thank you for having me. It is my pleasure to be here with Smart Investor. Sure, my name is Ruzi Rani Ajith. I am the chief executive officer at CGS-CIMB Securities Malaysia and group head of shariah services at CGS-CIMB Securities.

Prior to my appointment, I served as the head of equities in CIMB Investment Bank, where I have worked with the organisation in various capacities over the past 23 years. Before joining CIMB, I was with Affin Investment Bank for three years as a fund manager.

SI: Why do you think Shariah investing is important, and is it only limited to Muslims?

RRA: Shariah investing is not limited the Muslims. Shariah investing is for all. It is another approach to investing where Shariah compliance is to be adhered to. Shariah investing among others avoid prohibitive elements in shariah such as riba (interest), gharar (ambiguity) and maysir (gambling). In its process to uphold Maqasid (objective) Shariah, Shariah investing has always been closely linked to Social Responsible Investment (SRI) and Environmental, Social And Governance (ESG).

Shariah investing is a subset of SRI and also complementary to ESG. Due to its overlap with ESG and SRI, it is becoming increasingly popular and important for investors, with an increase in take-up on Shariah investing.

SI: What are the market trends should investors look out for in the near future?

RRA: The trend is the focus on Shariah and ESG investing. Global investors are increasingly aware of the synergy between ESG investments and Islamic finance. This contributes to the growing demand for Shariah-compliant investments as investors seek greater portfolio diversification and an alternative to investing traditional ESG. Shariah-compliant and ESG investing are complementary investment approaches that have important points in common, such as being a good steward of society and the environment. “According to research by Refintiv, Shariah compliance screening can do much to improve ESG performance. There is a direct correlation between Shariah compliance and higher ESG scores, and combining the two could improve overall risk-adjusted returns”.

We should see an increase in new Shariah or ESG product offerings to cater for various market segments.

Another trend that is taking centre stage is the green and renewable energy space as the world is gearing towards a net zero carbon by 2050. This is where the transition into green and renewable energy comes into play. Hence, funding this transition has created the demand for sustainability and green sukuk which has resulted in exponential growth.

SI: With the rise of inflation and interest rates, what should an investor do?

RRA: Never put all your eggs in one basket. Portfolio diversification can help to balance the risk and reward in your investment portfolio.

Also, investors can consider investing in ESG and Shariah-compliant products to reduce the risk in an uncertain market.  To also take into consideration to invest in defensive and high-yield stocks.

SI: Tell me more about CGS-CIMB’s involvement with Shariah investing?

RRA: CGS-CIMB started its Shariah business in Malaysia office where Shariah investing is further enhanced with various innovative products that are in the pipeline and will be launched soon. Confident with the prospect of Shariah businesses, we have also extended our Shariah services to our Singapore and Indonesia offices.

In Malaysia, CGS-CIMB offers a range of Shariah-compliant products and services from Shariah compliant trading accounts; with access to thousands of Shariah-compliant securities, margin facilities. We are the first broker to launch Islamic Cross Border Trading, as well as setting the framework for Islamic Securities Selling and Buying (ISSBNT).

The responses have been very positive. Over the past two years, we have managed to triple the number of Islamic trading accounts. We aim to continue to launch innovative Shariah Compliant products such as Shariah-compliant Discretionary Trading and Shariah-compliant Futures.

We are happy to have Singapore and Indonesia embarking on this journey, launching their first Shariah-compliant products and services at this Shariah Symposium. Moving forward, we will continue to expand our product and services in the region.

SI: Congratulations on the inaugural CGS-CIMB Regional Shariah Investing Symposium 2022 which was recently held, care to share more about this event?

RRA: Thank you.

The CGS-CIMB Regional Shariah Investing Symposium (RSIS) will be organized annually.

The RSIS sets as a platform to bring together exchanges, corporate leaders, industry experts and investors to explore economic and market trends within the Shariah Investment landscape.

RSIS aims to bring awareness and educate investors and public on Shariah investments, especially in Singapore and Indonesia.

The symposium showcases CGS-CIMB’s contribution to Islamic Finance industry in creating awareness on the subjects and its focus on Islamic businesses in the region.

CGS-CIMB’s aspiration is to become the regional leader within the Islamic Broking space. On the long run, this annual symposium is aimed to further provide deep awareness to the growing trend for Islamic Finance and Shariah Investment across the region.

The support from three exchanges namely Bursa Malaysia, Singapore Stock Exchange and Indonesia Exchange shows a positive sign to create awareness of Shariah investment around the region and encourages Shariah investments as a choice and an alternative to conventional investments.

SI: What are some of your plans for the future that you can share with us?

RRA: Our goal is to be a leader in Islamic Finance in countries with CGS-CIMB presence.

We hope to use our experience in Malaysia to lead the Islamic initiatives in countries where CGS-CIMB has a presence starting with Singapore and Indonesia which has the most potential.

In Malaysia, our focus will be on operational efficiency as well as continue to improve our Sariah product offerings. We will be launching two new products namely Shariah Discretionary Trading and the first in the world Shariah-compliant Futures this year.

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.

With the recent crypto market crash, investors are now very fearful of the market. Who would have thought Luna can lose almost 100% of its value in just a few days. Even the big boys like Bitcoin, Ethereum and BNB are not spared either, with huge losses all across the board.

Smart Investor spoke with Wei Zhou who is the new CEO of Coins, Philippines’ leading crypto and mobile wallet to find out more on this topic. Coins.ph is regulated by the Bangko Sentral ng Pilipinas (BSP) and is the first ever crypto-based company in Asia to hold both Virtual Currency and Electronic Money Issuer licenses from a central bank. One of its uniqueness is that it has a crypto license by the regulators and by becoming a bridge between virtual and real-life, accepting crypto and fiat along the way.

A brief introduction about Wei Zhou, he formally served as Chief Financial Officer of Binance, Zhaopin.com, and Charm Communications. He also led the landmark acquisition of Grindr, where he served as Vice Chairman. He started his career at Goldman Sachs, and he graduated from Harvard University with a Bachelor’s Degree in Economics and East Asian Studies.

According to him, everyone needs to learn about digital asset, since it is the future. Start by taking the time to understand the blockchain technology behind it. Then move on to the digital assets itself, such as Bitcoin and Ethereum. Understand what it is, why it was created, what are the benefits and what causes its price to move up and down.

It’s Easy To Get Started

Start opening up your own account by creating your own crypto wallet. It is now so much easier whereby most onboarding process can be done online. Some can even be done using only your smartphone. There are also platforms that did not even require its users to undergo a KYC (Know Your Customer) process.

Next up, get to know more about Non-Fungible Token or NFT. A non-fungible token is a financial security consisting of digital data stored in a blockchain, a form of distributed ledger. The ownership of an NFT is recorded in the blockchain, and can be transferred by the owner, allowing NFTs to be sold and traded.

We may have seen an NFT in the form of pictures, digital art. As the adoption rate of NFT gets higher, so does the NFT market value in general.

What’s The Reason For The Crypto Market Crash?

Crypto is still in its early stage and is highly speculative. There may also be an element of the Greater Fool Theory, where the next person is willing to buy more for crypto despite it not having any clear fundamentals.

But in all honesty, it is not only the crypto that is suffering from the bears. The world’s stock market is also crashing down.

For those who are suffering huge losses now, you need to go back as to why you bought them in the first place. Do you believe in the digital asset? Its ecosystem? Or do you simply buy because everyone else is buying?

That’s the reason why it is so important to be doing your own research. But the take-up rate for crypto is considered to be still low. With more people coming in the crypto market, the price will start going back up.

Upcoming Trends?

The blockchain is definitely the future. It is a proof of ownership for digital assets. There will be more games and metaverse taking the spotlight in the years to come. For content creators, NFT are good for them to able to earn an income.

But there must be a huge effort to build up the community, build up your trust and brands.

In the sports industry, national associations such as for basketball and football are partnering with the blockchain players.

Plans For The Future?

Wei Zhou is set to come out with additional tokens that has its own value in the market. Also, there are plans to come out with new NFTs with utilities that can benefit the holders.

He is also keen to embark on play-to-earn games which lets gamers earn money while playing their favorite games.

Start Small But Start Now

The easiest way to get started is by going on social medias and following influencers on their Twitter account. Next is to listen to podcasts so you are able to understand the terms and jargons that is being used.

Once you are in, there’s nothing better than getting your feet wet by joining in the crowd as community managers and engage the audience directly. At Coins, there’s the Coins champion for this purpose.

Making Money From Digital Asset?

Finally, Wei Zhou advises us to have a diversified portfolio and not to put everything in digital assets. Make sure you invest in real estate, stocks and start-ups, before going into digital asset.

Also invest in time as there are a lot of opportunities out there, waiting for it to go boom. This is true in the metaverse space where there’s a lot of hardware and software involved.