062 Market Data - Week Ended 28/8/2015

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Commodities

061 What to do during volatile market?

For the past one year, investing has been quite challenging. Malaysia was hurt by oil price slump end 2014, then now we are facing falling market and falling ringgit. Local unit trust has been hurt, some quite bad, by them.

In times like this, it is understandable to see client's unwillingness to continue investing. But is this wise? What should we do?

1. Sit back and review on hand portfolio

We should take an updated portfolio and their values. Sit back and looked at them. Market has changed, so should out portfolio be changed accordingly. If the portfolio is too concentrated in local equity market, think of diversifying into local bond, oversea equity, oversea bond, and cash portion. Go for more bond portion if you feel uncomfortable with equity volatility. But do not totally get out of equity market. We do not know when will market rebound, so we do not want to miss it.

2. Start a regular savings plan

As an investor, we should be happy to see equity on sales. But as human, we tends to feel uneasy seeing our portfolio lose value. It is equally not easy to put in money, large sum I mean, into equity in time like this. We can reduce our fear by starting a regular savings plan (RSP). The fund house will deduct a small sum of money from your savings account when the date approached. Sometime you will buy some high price units, some lower price units. By doing so, RSP not only will help to lower our average costs, it can help to accumulate wealth bit by bit.

3. Venture into oversea funds

Not all countries will react to market condition in the same way. Some may go up, some may go down. A little home work done and you will find some funds still perform. Example, when ringgit depreciates against another currency, try to look for opportunity in that country. Maybe their stock market and currency exchange rate make it attractive to invest some.

4. Study

Tough time is great time to learn new things. When times are good, we place ourselves in comfort zone. Take this opportunity to learn new funds, new strategies, new investment types. All these will us decide our future investment direction. Probably we have invested based on other people's opinions. Perhaps it's time we re-think are those funds suitable for our risk profile.

Talk to your consultant regarding your concerns and seeks his advice on the next course of actions.

060 Academic requirements to enrol into CFP course

I am considered earlier batch of CFP students. To enrol into a CFP course, the academic requirement then was a minimum of SPM. Then in 2014, I heard FPAM is going to lift the requirement to a minimum Degree holder. So, it was imposed from 2015.

This new requirements makes it harder to recruit new students. However, just recently (Aug 2015), I heard FPAM has relaxed the academic requirement to a minimum Diploma holder with a 5-year experience.

This is good news indeed. And it should be welcome, especially, those has been in unit trust industry for more than 5 years and is thinking of upgrading his career path.

With CFP, a student can apply for CMSRL license to become a licensed financial planner under a financial planning firm to practice. The scope of services he can provide to his clients widened to more than single product from a single company. He will be looking at improving clients financial shape to a better one.

The CFP course used to be a 6 modules course, it has been compressed into 4 modules since 2015 as well. So, it is faster for a student to complete his study and start practicing.

It is not easy to get a CFP service provider in Johor Bahru. So, we look upon whoever interested to venture into CFP course or financial planner career to contact us.

059 Which market has performed YTD?

Almost all markets were hit during the 2014 year end oil price slump. As we move into 2015, we were bugged by Greece issues until recently where ECB finally agreed to extend their financial help.

So for the last few months, investors were reluctant to invest because of uncertainty.

If we make a comparison of market performance, we notice Japan has been on the up trend. China has face some correction but has bounced back. I think another market we can look into is India. India market has been going up since bottoming in Jun.

I am into India funds.

058 A case of putting too much into insurance savings plan

Recently met a young lady. During the talk, she admitted she has a few insurance policies. She is unsure the content of the policies. She bought them just to support her friends.

I was intending to introduce her to do regular savings. She has to schedule her payments because she has just paid one and another is coming soon.

So, I asked for her policies to study. Well, she has 3 policies. It appears one of them is participating life insurance plan. This seems fair to me. The other two are actually five-year-paying and eight-year-paying savings plan. The commitment for these 3 policies is more than 10%of her annual salary. No wonder she feels the pain of paying.

Apparently, she doesn't have coverage for medical expenses, critical illnesses and accidents. All these coverages seems basic to me. Unless a client really insists on NOT having one, then everybody should have a decent coverage amount.

Upon rough analysis, the savings plan only generates her a rate of return of about 3% p.a. over a period of 15~20 years. If she has channel the money into investment, she can expect a fairly higher return.

A study of regular savings plan into performing funds over a ten year period showed an investor's money would have roughly doubled. If an investor put off a lump sum ten years ago, his money would have grown 1.5x~4x.

Time is indeed investor's friend.

Coming back to this lady. It is now her choice to continue her policies and be left without other basic coverage; or she could opt for some general insurance coverage temporarily until she made a decision.

I feel sad to see such situation. Client's policies has no cash value and she feels pain to simply let go. But to carry on means she has to carry the "burden" and at the same time wasted her opportunity. I think all insurance agents should go for need based selling where we sell the plan needed by clients.