5 Investments You Need To Review Before The Year Ends

This year has taught us a lot about our own resilience and the importance of being prepared for anything. Having enough emergency savings to deal with sudden expenses is one thing, but it also shows that our finances need to be managed with care.

However, it is not too late for you to take action. The final quarter of 2020 is now a good time to sit down and review your investments to make sure they are still meeting your needs. Here is a checklist of what you should do.

1. Review your savings

The first thing you should look at when reviewing your investments is to make sure you have enough savings. Having high net worth is great, but it’s not very useful if 100% of it is tied up in investments and you don’t have cash on hand.

So, prioritize a strong emergency savings fund. As usual, the recommended amount is at least six months of spending. Less and you run the risk of not being able to afford to fix that leaky roof or fix your car if they appear out of nowhere.

If you’ve found that you’ve had to use some of those savings over the past few years, make rebuilding your emergency fund a priority before investing more money.

2. Review your risk profile

You might not be in the same place you were when you started investing. You could be richer, poorer, or have more commitments; and you are almost certainly older. Either way, you should review your priorities and your risk profile.

To achieve this, you need to do exactly what you did before you started investing. Review and reset (if necessary) your investment goal and determine your time horizon for reaching it. The questions you should ask yourself are:

  1. How much cash do I have (i.e. cash in savings)?
  2. How much of my income can I risk losing now (you may have had an income change)?
  3. What am I investing in?
  4. How far am I from my investment objective (a shorter time horizon may mean I need to take higher risks)?

You can also plot your risk tolerance along a bell curve. When you are young, you can afford more risk due to a longer investment horizon, giving you more time to recoup potential losses due to economic downturns. This risk tolerance can increase over the years as you gain work experience and earn a higher salary.

However, once you finally hit your middle age and need to start protecting your assets, your risk appetite may wane. You will want to take less risk and perhaps move your investments to assets with more stable returns.

However, this is not always the case. You might be young, but you want to raise enough money to start a business. This gives you a much shorter time horizon instead of a long one to overcome potential bumps.

3. Review your asset allocation

Needless to say, you should also review your asset allocation right now. Not only because your risk profile may have changed, but also because the balance of your portfolio may have changed without you realizing it.

This is what we mean. Suppose you initially invested in a mix of 60% invested in trust units, with another 40% in commodities. Your unit trust is invested in high risk funds because you are an aggressive investor. Your products are there to ensure a certain stability and security.

But over time, the value of your safe investments has grown at a faster rate than your commodities. So much so that it now represents 70% of your total assets, even if you haven’t intentionally changed the mix.

While it may sound like you made some good investment decisions, it could also mean that your portfolio has become riskier than you would like. In this case, it may make more sense to cash out some investments and transfer the funds to other portfolios to maintain your ideal balance.

At the same time, your investments could have gone in the opposite direction and become too secure. If this happens, you may want to move some of your assets to higher risk funds to rebalance your portfolio.

In short, make sure your current asset allocation reflects your risk profile.

4. Make sure you have enough to retire

While making sure you have enough savings now, you should also check your retirement funds. For the most part, this is probably your EPF savings. However, as we have repeatedly pointed out, Malaysians do not have enough money to retire.

Even so, the EPF minimum savings target of RM240,000 just doesn’t seem like enough for anyone to comfortably retire.

For this reason, you should take charge of your post-retirement comfort. You can start by using EPF i-Invest to start diversifying your investments. While investing in a variety of sources is a good start, getting into a private pension plan (PRS) is an even better idea.

Not only will you be able to increase your retirement savings, but you will also benefit from tax relief (up to RM3,000 on your contributions – which will give you even more funds to reinvest in your investment portfolio.

5. Diversify your EPF portfolio with the main funds

EPF also aims to make its members aware of the value of investing and offers the possibility of investing part of your Account 1 funds in a trust fund – via the EPF i-Invest platform. It should also be part of the annual review of your investments based on your risk appetite and savings needs to help you meet your retirement goals.

Award-winning fund manager Principal Asset Management offers over 30 ETH-approved funds for your EPF i-Invest exam. They offer a variety of conventional and Sharia-compliant options depending on your risk tolerance and investment goals.

Below is an overview of the types of funds provided by the principal for your consideration.

Names of funds:RiskRegionFund objective
Principal Greater China Equity Fund
(formerly known as CIMB-Principal Greater China Equity Fund)
AggressiveChina, Hong Kong and TaiwanStrategically invests in the Greater China region.
Principal Asia-Pacific Dynamic Income Fund
(formerly known as CIMB-Principal Asia Pacific Dynamic Income Fund)
AggressiveAsia-Pacific excluding JapanAims to provide regular income by investing in the primary sector in the Asia-Pacific region (excluding Japan). Aims to achieve capital appreciation in the medium and long term.
Principal Dynamic Islamic Asia-Pacific Equity Fund
(formerly known as CIMB Islamic Asia Pacific Equity Fund)
AggressiveAsia-Pacific excluding JapanA Sharia-compliant fund that invests in emerging and developed markets in the Asia-Pacific region (excluding Japan).
Principal DALI Equity Growth Fund
(formerly known as CIMB Islamic DALI Equity Growth Fund)
ModerateMalaysiaAims to achieve constant capital growth in the medium and long term.
Main Sukuk Islamic Lifetime Fund
(formerly known as CIMB Islamic Sukuk Fund)
Moderate
Conservative
MalaysiaAims to earn above-average income in the medium to long term by investing in a diversified portfolio consisting primarily of Sukuk, certificates of deposit, short-term money market instruments and other investments permitted under the principles of the sharia.

Get rewarded with the Principal’s end of year promotion

Invest with the principal via EPF i-Invest from today until 12 December 2020 to earn up to 0.58% Touch ‘n Go eWallet credit based on your total net investment with the principal via the principal EPF i-Invest.

Click here for information on the campaign and terms and conditions.

You shouldn’t wait until December to review your investments. These questions take time and you really don’t want to deal with them while thinking about the holiday season.

So get your investments in order, have a restful December, and get ready for a more optimistic 2021.

If you are new to investing or know someone who is, sign up for EPF i-Invest through Principal Asset Management and you will earn a welcome reward in RM50 Touch ‘N Go Reload Pin eWallet. Promotion ends December 31, 2020. Learn more.
Disclaimer You are advised to read and understand the Prospectus / Information Note / Disclosure Document and its Product Sheet (if applicable). The mentioned documents have been registered with the Securities Commission Malaysia (SC) which does not recommend or endorse these products or services. A copy of said documents may be obtained from our offices, distributors or on our website at [www.principal.com.my]. Investing involves risks and costs. You should understand the risks involved, compare and take into account the fees, charges and costs involved, make your own risk assessment and seek professional advice, if necessary. This announcement had not been considered by the SC.

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Jothi Venkat

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