First and foremost, diversification is an essential financial resolution that I believe everyone should set. It may seem like the most basic of concepts, yet this is something many tend to forget. Perhaps telling my story would help.

I grew up in India and worked there for more than a decade before leaving the country to work overseas. You may not know that the Indian property market had been growing steadily in the last 30 to 40 years with a few booms in between. During the good times, property prices could increase tenfold in just a span of about six to seven years. It was amazing. So you can see why property was one of the most preferred asset classes for Indian investors.

Therefore, it is also not surprising that my father had helped me buy my first property as an investment when I first started working after graduating from university. I didn’t have enough money to pay for the down payment of the house, so he generously helped me with that. My father thought it bode well for me in the future if I had a property investment, and he was right. Property prices shot up for many years after that, and the returns were high!

Such an experience led me to invest most of my money in properties as I progressed in my career. At one point, about 80% of my portfolio consisted of properties and all of them were located in one country — India. It was the country where I came from and knew best.

My investment returns were good until things suddenly took a turn for the worse in the last ten years due to changes that happened to India’s political and economic environment. Property prices in many places in India either collapsed or stayed flat. My portfolio took a big hit during that period and I am still struggling to sell them off until today.

The mistake I made in the past was to put all my eggs in one basket. You can see how diversification, even though it is a simple idea, could be easily forgotten.

The second resolution that you should make for next year is to review and rebalance your portfolio periodically. Macroeconomics and market dynamics could change and those changes could impact your investment returns. You might want to take profit on specific asset classes and cut your losses in others.

In hindsight, my portfolio would have been better off if I had reviewed it properly and dared to cut losses. However, I wasn’t looking at the market closely as I was busy working. I was also hoping that property prices would recover subsequently, if not tomorrow, maybe later that year, or even the next year. I was sitting there doing anything but trying to optimise my portfolio.

Having learnt those lessons, I have since diversified my investments into various asset classes including fixed deposits, equities and bonds. I would also review my portfolio from time to time to make sure it could generate returns that I was expecting.

Today, my portfolio is giving me a consistent return of 5% to 7% every year, which is what I’ve been expecting.

The third resolution I would suggest for next year, and in the many years to come, is to start saving and investing for retirement. This is something many tend to overlook as they believe it is not urgent. However, the fear of not saving enough for retirement should be the key motivating factor for us all.

The Employees Provident Fund (EPF) has published several reports in the past, pointing out that most Malaysians do not save up enough for retirement. One of those reports, released in 2017, said more than two-thirds of EPF members aged 54 had less than RM50,000 in their accounts. This amount, would only be able to financially support themselves for four and a half years at most in their retirement. In addition, 70% of members who withdraw their funds at age 55 use up their savings less than a decade after retiring.

Retirement planning seems more challenging as we are living in a low interest rate environment. The US Federal Reserve (Fed) has lowered its rate three times this year while Bank Negara Malaysia cuts rate by 0.25% to 3% in May. Moving forward, central banks globally are expected to ease their monetary policies further as global growth remains sluggish. Adding to this retirement planning challenge is a longer life expectancy as healthcare technology advances and rising healthcare cost each year.  

A recent survey done by Standard Chartered Bank shows that most of us want to retire comfortably to spend time with family and give back to society. But would you be able to achieve these goals when you don’t even have enough money for yourself?

Once you are done setting these resolutions, the next step is to also set well-defined goals and come up with a solid plan to achieve them. A common mistake many make is not to articulate their goals clearly enough. As a result, they lack financial discipline and they tend to repeat the same mistake the following year.

If you are already clear about what you want but are one of those who face challenges in how to go about doing so can seek advice from financial institutions like Standard Chartered Malaysia. Our advisors will talk to you to understand your financial goals before coming up with a holistic plan to help you achieve those goals.

What you can do next?

Review your portfolio and make sure it’s appropriately diversified and aligned with your risk tolerance and investment timeframe.

Want to talk about your portfolio? Leave your details here or call us at (03) 7718 9788 to learn more