Will 2013 be a better year for investor like you?

Well, it depends on what report you have read; your own outlook as well as what strategies you will employ in your investing.

We all wish and hope for a better year. 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 The Borneo Post readers a happy new year. I read in some Facebook posting that the doom’s day had been postponed to year 3012. So one less worry from our minds now.

But when you read what some columnists are writing, you will surely notice they are writing about US’s 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 titles like ‘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 a lot of the time 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 taking in everything that others are writing in the papers and what other people are talking about in 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 trust is for long term investment”, but only after investing you notice your investment is stuck because he or she sold you unit trust funds at the height of market cycle.

I have met too many investors buying unit trusts in 2006 and 2007 who got caught by the financial crisis in 2008 and some only broke even with their investments 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 an 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 three to five years; or better five to seven years, or even eight to 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. Lets 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..” when you are trying to digest all the economic events and crises that you read about in 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 an investing game plan that covers 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 loss? Or continue to buy low and average down?

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

Conclusion

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

(This column will appear on a weekly basis every Wednesday from 2013 onwards.)

Lee Khee Chuan ChFC,CF, CLU,FLMI,BA.(S’pore) is a Bank Negara and Securities Commission-licenced financial adviser representative (CMSRL/B1602/2011) and director, Advisory & Practice Management of Standard Financial Planner Sdn Bhd (SFP). SFP serves as a licenced on-shore and off-shore multi-funds platform for retail investors. To consult Lee on fund investing, please contact him at 016-888 0138.

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