Username
Password
Forget Password?
  1. Indices
  2. Commodities
  3. Currencies
Straits Times 3,116.17 -8.28 -0.27%
Hang Seng 26,503.93 -17.92 -0.07%
Dow Jones 26,787.36 -29.23 -0.11%
Shanghai Composite 2,991.05 -16.84 -0.56%
Will 2013 Be A Better Year For Investors Like You?
Malaysia Perspective | 23 January 2013
By:

By Lee Khee Chuan

Depending on what report you have read; your own outlook as well as what strategies you will employ in your investing, you often hear contradictory stories about the state of the global economy in 2013. To sum up, we all wish and hope for a better year, compared to the last. That’s actually human nature to be optimistic, or else we would have joined the dinosaurs long ago.

However, positive thinking or wishful thinking is never enough, especially in investing.

Let me first wish all Share Investment readers a happy new year. I read in some Facebook posting that the dooms day had been postponed to year 3012. So one less worry for our minds now.

But when you read what some columnists are writing, you will surely notice they are writing about the US fiscal cliff, US debt ceiling, Eurozone sovereign debt crisis, China’s leadership transition and elections in some countries, etc.

Again it depends on what articles you read that will shape your outlook for 2013 and beyond.

In the last few days, I have seen article titled “2013: A time of turbulence”; “Dim global growth prospects in 2013”; “Waiting for Certainty”; “Present trends will continue”; “Emerging markets stronger”; “New emerging stars shine the path”; and “And we lived happily ever after… “

All the articles have some useful and interesting points. But quite often it can actually confuse you further.

Clear Up Your Thinking
My humble suggestions on how you should try to clear up your thinking and form your own assessment of the situation and have an objective view of the outlook in 2013 and beyond:

1. Investing time horizons

Instead of just accepting and take in everything that others are writing in the papers and what other people are talking about at the coffeeshops (and also on the Internet since we are living in the Information Age now), one simple way to sort out your thinking especially when we are talking about your investing, is to look at your investing time horizons.

But beware of some unit trust fund promoters who sell you the idea that: “unit trusts are for long term investments “,only to realise that your investments are stuck because he or she sold you unit trust funds at the height of the market cycle! I have met investors buying unit trusts in 2006 and 2007 and got caught by the financial crisis in 2008 and some only broke even with their investment after four or five years!

Coming back to the concept of “time horizon”, what I am trying to say is that you should try to look beyond one year when you are investing. (That reminds me of a remark by a unit trust company personnel and my friend who joked that many unit trust fund buyers’ long term horizon is three months!)

If your time horizon is 3-5 years; or better 5-7 years, or even 8-10 years, then your whole perspective changes! It basically means the money you want to invest can be set-aside for such a period of time and you are investing for long term goals like your young children’s education fund and for your own retirement.

2. Let’s put this in perspective

Another suggestion to enable you to think more clearly is to start your thinking with the phrase: “Let’s put this (info) in perspective..” especially when you are trying to digest all the economic events and crises that you read about in the newspapers and magazines.

Then you will be able to think more objectively and form a balanced view of what is going on now and what may happen next.

3. Have investing game plans that cover both extreme situations

To counter the volatile and uncertainties that are coming up in 2013 and possibly beyond (in actual fact, it is a continuing trend from the previous two to three years), it is good to have an investing game plan or strategy that can cater to both extreme situations – if the market goes up a lot and if the market comes down a lot.

You can try out this way of thinking: permute (meaning you list out all the possible situations which will happen) the possibilities and list them down. For example, if you are looking at investing your money now, there are basically three possible scenarios. The market you want to invest may either go up a lot; come down a lot or stay flat (including go up a bit or come down a bit).

Then you may want to ask yourself: What kind of investing game plan or strategy should I have to cater to all three situations?

The worst-case scenario is what happens when the market comes down a lot? What can I do in my investing game plan? Cut losses? Or continue to buy low and average down?

What happens when the market goes up a lot and after that comes down again? Let it run or take profits? And what happens when the market stay flat?

Conclusion
One wise person said that asking the right questions is more than half the battle of finding the right answers. It also applies to your plan in investing profitably and increasing the odds of achieving your financial goals.

Lee Khee Chuan is a Securities Commission and Bank Negara-licensed Financial Adviser Representative with Standard Financial Planner (SFP) Sdn Bhd. He holds a B.A. majoring in political science and psychology from National University of Singapore and is a Chartered Financial Consultant ( ChFC ) and Certified Financial Planner™ ( CFP™ ) For more information, please visit: www.lkcestateplanning.com

Join The Conversation
The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

All Rights Reserved. Pioneers & Leaders (Publishers) Pte Ltd. Best viewed with Mozilla Firefox 3.5 and above.