Aboi's Investment Strategy for 2016

What have I learned?
I'm becoming more fond of funds. They do perform; Kenanga made me +64%, Affin Hwang +40% and there rest are also in +ve territory. They are easier to monitor; one only looks at certain ratios (I do this twice a year only) and since the stock selection is done by the manager most of my focus is on macroeconomics level which IMO is a lot more interesting. Second with FSM platform (see link) it is far cheaper to invest in funds @ sales charge of 0%-2% (normally they are 6%!). FSM also offers relevant educational and research articles.

More importantly is my time constraints due to other commitments & plans. As such I'm not in a good position to do deep down research in a consistent manner (e.g. using DCF model). Nevertheless it was good experience as all my investments made positive returns (the only exception is Genting which I am still holding). Using my experience since 2009 I believe that I am able to leverage other people's research and come with my own conclusion - this will save a lot of time. Therefore I am moving towards equity investments that offers high dividend yield play.

Obviously there are also things that many did not foresee or expected including me; crash of the oil price towards $30 and China's spectacular 2nd stock market crash (a temporary blow for my PRS). This is why macroeconomics is interesting especially on the global level.

What are my plans?
Here I outline my financial plans for 2016 and these are just highlights; I will go thru them in detail as I go along posting more in the coming weeks. Here are some things you should know first.

• Risk correlates with expected returns (per annum); the more risk it has I will certainly expect more returns and vice versa; e.g. you can also lose that much. 
• (New) is something I will add into my portfolio this year. (Add) would mean to increase allocation in an existing holding. (Maintain) is simply holding it for the time being.

Risk: Low; Expected Returns: ~4% or less
(New) RHB Cash Management Fund 2 (see link) - Class: Malaysia Money Market
(Add) AmDynamic Bond - Class: Malaysia Bond (see link)
(Add) Affin Hwang Select Bond - Class: Asia Bond (see link)

Risk: Medium; Expected Returns: 6%-8%
(Maintain) Affin Hwang Select Income Fund (see link) - Class: Asia Ex Japan Conservative 70% Fixed Income 30% Equity
(Add) Malaysian REIT for high dividend yield play - Class: Malaysia Property
(Add) Selected stocks for high dividend yield play - Class: Malaysia Equity

Risk: High; Expected Returns: 10%-12%
(Maintain) Kenanga Growth Fund - Class: Malaysia Equity
(Maintain) Aberdeen Islamic World Equity Fund - Class: Global Equity
(Add) CIMB Principal PRS Asia Pacific ex Japan Equity Fund - Class: Asia ex Japan Equity

Risk: Very High; Expected Returns: ~13 or more
(Add) Eastspring Investments Small-Cap Fund - Class: Malaysia Small to Medium Companies Equity

Others:
(Maintain) 11% for EPF contributions - Tax savings & more retirement surplus.
(Maintain) Continue existing insurance policies and endowment plan. No addition.

The above constitutes my active wealth management strategy; a life long learning process and funds can be adjusted on need basis. The only true purpose for this portfolio is to simply make more money from money. EPF remains the core passive retirement fund which is not really adequate therefore I need my active strategy. Insurance forms the basis of wealth protection as well as last resort emergency funds (from policy surrender value).

Summary
I did mentioned before that one should "look for safer alternatives even though it offers lower returns". This is where RHB Cash Fund, AmDynamic Bond & Malaysian REIT/selected equities come into the core strategy. Here is where the bulk of the allocation will go.

PRS continues to be an auto include for three reasons; [1] Cheap valuation; more so after the recent selldown (see link) [2] Tax deductible up to RM3k [3] In for the long haul e.g. until retirement age; this reason compliments [1].

Es Small Cap fund is an opportunistic investment ONLY as the small cap index (see below) is experiencing correction. If it falls further say towards 13000-14000 I would say that it is a good chance to load it up. The potential of +ve return comes from starting at a low base that has good upsides going forward.

Disclaimer: The reports, analysis and recommendations in this blog are solely my personal views. I do not link to any investment body or company. As such, I will not be responsible of any of your investment decision. Consult your investment adviser or come to your own conclusions before making any investment decision.

Happy Chinese New Year 2016 - Gong Xi Fa Cai

May this New Year bring you a fiery surprise, prosperity and joy.

Raya Cina sudah mari,

Balik kampung banyak happy,

Panggil member cari kaki,

Mari rumah saya main judi!

Kambing🐑 pergi, Monyet 🐒mari, 

Soi pergi, Ong mari,

Tahun lepas sudah pergi,

Tahun ini mesti happy.

Kena magnum kena loteri,

Dalam bank banyak money💰,

Badan sihat tiap-tiap hari,

Hari hari senyum tak ada rugi.

Happy Fire Monkey year and I wish you Gong Xi Fa Cai✨🎉

Is the Bear Out Already?

Hi! Long time no see..

Article courtesy of Invest Made Easy Blog (link). I made some modifications and my own comments.

If you're an investor investing into stocks or unit trust, it is vital that you should keep abreast with the latest development of the global equity markets as well as understand the key factors that are affecting the market sentiment. The recent massive drop in the global equity markets is one event that you as an investor should look into thoroughly and fully understand the causes before deciding on your next investment decision.

Here's what happened most recently and what's causing it.....

One of the worst start of the year for global markets (below as of 2nd February 2016)

- Major markets broke their long term trend lines and rebounds in these two days of Feb don't look strong enough to climb back to uptrend direction.

- #1 Part of the reason is oil. Price of crude oil has slide 55% over the past one year and that has an impact on a number of countries around the world. This is due to [1] oversupply - oil nations refuse to reduce production for fear of losing market share [2] lower demand - slower China growth.
- Oil and stocks/equities are positively correlated. Market is starting to feel the brunt from falling oil prices.
- Lower oil prices cancel capital spending plans of companies that invest primarily into energy. Certain sectors such as materials and industrial are also feeling the impact of oil's fall.
- Oil producing countries are making lesser profit (like Malaysia). This will certainly have a significant impact on the country's GDP and finances.

What to be aware of?
As long as all oil producing nations refuses to reduce their production, low oil prices are here to stay. Unless there is a major conflict in Middle East (e.g. Saudi vs Iran), war, OPEC cuts production.

- #2 Slowdown in China. IMF cut its world economic growth forecast by 0.2% to 3.4% on concerns of a slowdown in China.
- China; world's second largest economy grew by 6.9% for 2015 the slowest rate of growth since 1990.
- China stocks has tanked big time since the start of 2016. Within the first week of 2016, the China stock market (Shanghai Stock Exchange) was shut down twice as circuit breakers were triggered when the index fell below 7% of its opening value.

First trading halt (4th January 2016)

Second trading halt (7th January 2016)

It has since removed the circuit breakers for it is said to have worsen the sell-off and create uneasiness.

What to be aware of?
This March 2016, the ruling party is expected to unveil a new 5 year plan that touches on nation building, from the economy to foreign policy, the military and the environment. If the plan is able to convincingly calm the nerves of investors, we might witness a rebound for the China stock market.

- #3 US Fed Rate Hike. When an interest rate is raised, it means that the country's economy is recovering from a recession. Therefore when the Federal Reserve of the world's largest economy announced an interest rate hike on the 16th of December, the general believe (for the decision makers) was that the US has finally come out from recession. There's also talks that the FEDs intend to raise the interest four more times over the period of 2016.

Such optimism is not share by many investors whom strongly believe that the economic data referred to by the FEDs are fundamentally flawed. As a matter of fact, the consensus is that the US economy is not as healthy as the FEDs think it is. Poor retail sales, low inflation and a myriad of other economic data are pointing at the opposite direction.

What to be aware of?
US Fed's original plan is to up the rate by 1% within 2016. This is unlikely to happen judging by the shaky start of 2016. It is more likely it will be a cautious 0.25% hike in 2016. You should be aware of the dates of the FOMC meeting, this is when and where they will decide for a rate hike or not.

In a Nutshell
It's a challenging year for equity investors with multiple headwinds in multiple fronts. I made my decision way back in 2015 already and it remains the same. Cash is king. Wait for "Jualan Harga Murah". Look for safer alternatives even though it offers lower returns. I will be posting my likely picks and my strategies for 2016 so stay tuned. All the best and happy investing, it's never too late!