6 Things We Learnt From Financial Experts In Principal’s Investing Seminar

iMoney was recently invited to an investment seminar that was organised by Principal, a global asset management firm.

In the seminar, experts, guest speakers and panellists came together to share insights on empowering one’s self with knowledge and skills to improve financial confidence, share insights on building and preserving wealth, and roundup of market conditions and outlook.

The following panelists and speakers were part of the seminar:

• Mitul Lakhani, our very own CEO of iMoney
• Julian Ng, CEO & Co-Founder of Akru and blogger of verylongrun.com
• Suraya Zainudin, Personal Finance Blogger at ringgitohringgit.com
• Nor Akmar Yaakub, Head of Financial Education Department of Agensi Kaunseling & Pengurusan Kredit (AKPK)
• Robitahani Zainal, Principal Investor
• Linnet Lee, CEO of Financial Planning Association Malaysia
• Joyce Chuah, CEO of Success Concepts Life Planners & Licensed Financial Planner
• Daniel Wong Piik Zchen, Deputy Manager of Quantitative & Performance Analysis Department of Employee Provident Fund Malaysia (EPF)
• Patrick Chang, Chief Investment Officer, Malaysia & Equity ASEAN Principal Asset Management

Here are six things we learned from them:

1. Nurture financial literacy in your children

The panellists stressed on the importance on building good financial habits in children, even from a young age.

Lakhani shared his method of teaching his children the power of saving: “I told my kids, what I’m going to offer you is, every month you’re going to get pocket money. Whatever you save at the end of the year…I’m going to double it.”

Robitahani also shared that she teaches her children the concept of an emergency fund with their pocket money, in hopes that they will carry these values into adulthood.

On the other hand, Lee taught her daughter the value of money by ‘employing’ her during school holidays – that is, paying market rate for data entry and filing services.

2. Take the first step

Delving into the world of personal finance can be overwhelming. If you don’t know where to start at all, here’s what you can do.

Set aside part of your income as savings. “Take your income – the first paycheque that you get – set a rule and say, I’m going to set aside 10%, 20% or 30% of this, and start with a simple savings or fixed deposit account,” said Lakhani.

3. Know your risk profile

Facing analysis paralysis? There are a lot of financial instruments and asset management firms in the market – what should you invest in?

Before you start investing, you should be aware of how much risk you are able to take on. According to Lee, taking a psychometric test (such as those provided by FinaMetrica) to determine your risk profile can be useful. But if you can’t afford paid services or tools, there are a lot of free resources online you can use – just make sure you go to reliable sources.

From there, you can think about how you’d like to allocate your investments.

For example, Nor Akmar cautions that if you get too emotionally attached to movements in the market, don’t invest in equities. Instead, keep your money in EPF or allocate some in a fixed deposit, said Chuah.

However, Chuah also notes that investors should get used to taking on higher risk – albeit slowly.

Lakhani offers some advice for those looking to build their risk appetite: as you save more money, you’ll build a war chest of savings. Over time, your risk appetite will increase, because you’ll have a capital buffer to fall back on. Then, you can start investing in riskier products to get higher returns.

4. Do what is practical

If you’re still struggling with starting your investment journey, Suraya offers a piece of advice. “First, I do what’s practical,” she said. This includes contributing to EPF and to Private Retirement Scheme (PRS) for the tax benefits.

Likewise, Wong points out that if you’re facing analysis paralysis, a practical thing you could do is to make additional contributions to your EPF account. You can contribute any amount, as long as it doesn’t exceed RM60,000 a year. Later, if you decide to invest in unit trust funds, you can direct your existing EPF savings into them.

5. Consider the opportunity cost of buying a car

Say you have RM60,000. You’d like to buy a car. Should you take out a loan, pay the down payment and invest the rest of your money…or should you buy the car in cash?

Ng proposes an alternative to those intending to buy a car: don’t buy one at all.

While he noted that some families may require a car due to certain circumstances, he said, “Today, more than any other time in our lives, the transportation solutions are so varied, flexible and convenient. You can take the LRT, MRT or ride-sharing.”

He explained that if you put the money you would have spent on the car into a robo-advisor, you could set it up so that it remits money to you on a monthly basis. You could use this monthly remittance to cover your transportation costs (MRT, ride-sharing, etc.), and at the same time you would be able to grow your investment via the robo-advisor platform.

6. Start as early as you can

According to Chang, it’s best to start investing as early as you can.

He gives an example: imagine a 25-year-old who has just graduated. He invests RM100 a month for the next 30 years until he retires. Compare this against someone who invests the same amount, but only starts investing at 40 years old, and does so for the next 15 years.

After 30 years, the person who started at 25 years old would have around RM127,000, assuming a 6% to 7% annual return. But the person who started investing at 40 years old will only have a third of that.

The more time you give your investments to grow, the more wealth you’ll accumulate in the long term – that’s the power of early investing.

Keep learning

Whether you’re just starting out, or you’re somewhere in the middle of your personal finance journey, the key is to keep learning. Visit our archives for more personal finance tips and tricks!