We’ve seen how the Covid-19 pandemic has hit us in many ways last year, and 2021 looks like it won’t be any different. Looking at the aspect of interest rates, it’s cheaper to borrow money now than ever before. However, the direct impact of cheaper loans will be the rate of return to your investments such as fixed deposits. Gone are the days when one could earn a comfortable yield of 3 to 4% per annum; we’re looking at less than 2% right now!
As an investor, should you maintain the status quo and let your funds float in fixed deposit, or should you re-strategise to see if there are any other products that could give you interest rates like before, or maybe even more?
Here are some steps you could explore in order to bring your portfolio back to its glory days:
Start the ‘new normal’ in investing
Let’s face it, storing all of your hard earned savings for emergency funds and future retirement in fixed deposits isn’t really a crisis-proof strategy. Your parents and grandparents may have taught you that fixed deposit is a safe haven, but with the banks’ overnight policy rate (OPR) currently sitting at interest rates of 1.75%, can it still be considered that? Imagine teaching the same investing values to the next generation – they’ll be forced to earn more just to keep up with inflation! Why not teach them something valuable such as financial literacy? This starts with you.
There’s more to life than just fixed deposit
Keep an amount that you’re comfortable with as your nest egg in fixed deposit, which could range from 6 to 12 months’ worth of expenses. Invest the excess in platforms that can meet your medium to long term needs such as purchasing a home, getting married, children’s education as well as your retirement. The cost of basic life necessities such as home, food, clothing, medical will continue to rise faster than your salary increments, which is much better than simply collecting poor returns from low interest rates. Thus, it’s vital that you make your money work hard for you, or else you’ll need to work harder and longer for less pay!
Decide now and adapt
The Covid-19 pandemic has swept away what used to be comfortable safety nets, like fixed deposits for example. Businesses are shutting down, pay cuts are a norm and exploring additional income is more common now than ever for many. Investors who used to fear dividend-based and equity funds are now more open to exploring these asset classes.
That’s the beauty about human beings – we’re all survivors. When push comes to shove, we’ll do whatever it takes to survive. Do the same with your investment portfolio. You’ve worked hard all your life, so avoid letting these hard earned funds slowly slip away by not maximising your returns. How does investing in Tesla, Geely, Proton, Alibaba, Facebook and Microsoft sound like to you?
Consider investing in foreign currency
For investors who have specific goals such as migration or sending your children abroad for education, you can consider beginning your investment journey in foreign currencies such as GBP, USD, SGD and AUD. The benefits of doing this earlier could save you the cost of currency conversions later. Your funds will already be in foreign currency and when the time comes to execute your goal, you save yourself the conversion differences. Use these savings to boost your retirement instead.
Work with a Licensed Financial Planner
The benefits of working with a professional such as Licensed Financial Planner is the unbiased advice you’ll get as well as recommendations on potential investment products that suit your risk tolerance. By tapping into their experience, you’re able to cut short your learning process and immediately hop onto the investing bandwagon that goes beyond just fixed deposits. What if there are ways to help you earn an average annual return of 5% to 10%? Would you be willing to give yourself the chance to learn and explore?
The way forward in this current pandemic setting is to continue to be nimble in everything that you pursue. If you’ve always relied on your salary (otherwise known as active income), you ought to start somewhere in building your passive income. If your passive income is not growing at the rate that you want it to be, review what works, what doesn’t and explore other options that could take your portfolio further. Change is constant, and the decisions you make determine your destiny. Decide and choose what’s best for you. One simple change could drastically change the course of your future!
About the author
Suean Chung is a Financial Advisor, approved and licensed by Bank Negara Malaysia and the Securities Commission Malaysia. She can be contacted at firstname.lastname@example.org