Investment Checklist: 5 Things You Need To Do Before 2020 Ends

This year has taught us many things about our own resilience, and the importance of being prepared for anything. Having enough emergency savings to ride out sudden expenses is one thing, but it also goes to show that our finances need to be carefully managed.

However, it is not too late for you to take action. Now, the last quarter 2020, is a good time to sit down and go over your investments to make sure that they still meet your needs. Here’s a checklist of what you should be doing.

1. Review your savings

The first thing you should be looking at when reviewing your investments is making sure that you have enough savings. Having a high net worth is great, but it is not much use if 100% of it is tied up in investments and you have no cash on hand.

So, prioritise having a robust emergency savings fund. As usual, the recommended amount is at least six months’ worth of expenses. Any less and you run the risk of not being able to afford to fix that leaking roof or car repairs if they appear out of nowhere.

If you’ve found that you needed to use some of those savings over the past few years, make it a priority to rebuild your emergency fund before you put more money in investments.

2. Review your risk profile

You may not be in the same place as you were when you first started investing. You could be richer, poorer, or have more commitments; and you are almost certainly older. Whatever it is, you should be taking another look at your priorities and risk profile.

To achieve this, you should be doing exactly what you did before you started investing in the first place. Review and reset (if necessary) your investment goal and figure out your time horizon to meet it. Questions you should be asking are:

1. How much do I have in liquid assets (i.e. cash in savings)?
2. What portion of my income can I stand to lose now (you may have had a change in income)?
3. What am I investing for?
4. How far am I from my investment goal (a shorter time horizon might mean needing to take on higher risks)?

You can also plot your risk tolerance along a bell curve. When you’re young, you can afford more risks due to having a longer investment horizon – which allows you more time to recoup potential losses from economic dips. This risk tolerance may increase over the years as you gain work experience and earn a higher salary.

However, after you eventually reach your middle-age and need to start protecting your assets, your risk appetite may decrease. You will want to take fewer risks and maybe move your investments into assets that provide more stable returns.

That said, this is not always the case. You might be young, but aim to raise enough money to start a business. This gives you a much shorter time horizon instead of a long one to ride out potential bumps.

3. Review your asset allocation

Needless to say, you should be reviewing your asset allocation at this time as well. Not just because your risk profile might have changed, but because your portfolio balance may have changed without you noticing.

Here’s what we mean. Assume that you originally invested in a mix of 60% invested in unit trust, with another 40% in commodities. Your unit trust is invested in high risk funds because you are an aggressive investor. Your commodities are there to provide some stability and safety.

But over time, the value of your safe investments has increased at a greater rate than your commodities. So much so that it now accounts for 70% of your total assets, even though you haven’t intentionally changed the mix.

While this may sound like you made some good investment decisions, it may also mean that your portfolio has become riskier than you would like. In this case, it may be wiser to cash out some investments and move the funds over to other portfolios to maintain your ideal balance.

At the same time, your investments could have gone in the opposite direction and become too safe. If this happens, you may want to move some of your assets into higher risk funds to rebalance your portfolio.

In short, ensure that your current asset allocation reflects your risk profile.

4. Make sure you have enough to retire

While you’re making sure you have enough savings now, you should also double check on your retirement funds. For most this is likely your EPF savings. However, as we have pointed out many times, Malaysians do not have enough money saved to retire.

Even then, the minimum EPF savings target of RM240,000 just doesn’t seem like enough for anyone to retire comfortably.

Because of this, you should be taking your post-retirement comfort into your own hands. You can begin by using EPF i-Invest to start diversifying your investments. While investing in various sources is a good start, getting into a private retirement scheme (PRS) is an even better idea.

Not only will you be able to boost your retirement savings, you will also earn tax relief (up to RM3,000 from your contributions – giving you even more funds to sink back into your investment portfolio.

5. Diversify your EPF portfolio with Principal funds

EPF also aims to increase its members’ awareness about the value of investing and provides the option of investing a portion of your Account 1 funds into unit trust – through the EPF i-Invest platform. This should also be part of the annual review of your investments depending on your risk appetite and savings needs to help you reach your retirement goals.

Award winning fund manager Principal Asset Management offers over 30 EPF approved funds for your EPF i-Invest consideration. They offer a variety of conventional and Shariah-compliant options to suit your risk tolerance, and investment goals.

Below is a snapshot of the kinds of funds provided by Principal for your consideration.

Get rewarded with Principal’s year end promo

Invest with Principal through EPF i-Invest from today until December 12, 2020 to earn up to 0.58% worth of Touch ‘n Go eWallet credit based on your total net investment with Principal via Principal EPF i-Invest.

Click here for campaign information and terms and conditions.

You should not be waiting until December to go over your investments. These matters take time, and you really don’t want to deal with these things while also thinking about the holiday season.

So, get your investments in order, have a nice restful December, and be prepared to face a more hopeful 2021.

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