Financial Fitness Tips - Part 2

A continuation of Financial Fitness Tips - Part 1.

5. Funds for the future.

Thanks to improved healthcare system, we now have longer life spans and can live well into our eighties. But with the general retirement age in Malaysia pegged at 55, we have a relatively shorter time period to save for our retirement. According to the US Department of Labour, the key to a secure and comfortable retirement is simply to plan ahead. How much do we need to live the lifestyle we are used to? Putting into account the rising inflation rate, it is important to for you and me to invest in a diverse set of funds to significantly minimise risks and reduce the volatility of our portfolio. Diversifying our investment portfolio is one of the most effective ways to protect our investments, especially when we are saving for the purpose of retirement.

6.) Invest regularly.

Experts will tell you that the key to making money is to always stay invested no matter how the market is performing. Adopting dollar cost averaging, or ringgit cost averaging as locally known, by investing regularly. They can purchase more units when prices are low, and fewer units when prices are high. This lowers the total cost per units of investment, and provides a lower overall cost for the investments purchased over a time. Investor should apply the RCA in a volatile market environment as this strategy effectively reduces the impact of market cycles on their investment portfolio.

7.) Taking control

The road to financial freedom waits for no one. As such, the time to start is NOW. American entrepreneur, author and motivational speaker Jim Rohn once said, "You must take personal responsibility. You cannot change the circumstances, the seasons, or the wind, but you can change yourself. That is something you have charge of." You need to resolve to begin grabbing the reigns of your personal financial future. And once you are on the road to financial freedom, you must resolve to stick to it.

Financial Fitness Tips - Part 1

I would like to share some of my opinions your financial fitness tips.

1.) Save, save, save!

A study by Putnam Investments (a privately owned investment management firm in the U.S) showed that savings is an important component of wealth buidling. By saving a substantial amount, you can allocate a good part of savings towards investment to build a decent retirement nest egg, and in the process create a comfortable cushion for themselves in the event of periodic setbacks as a result of market volatility and unforeseen circumstances. In other words, let them know that the more they save, the more they can invest to achieve their financial goals.

2.) Status Savvy

We should check through our own financial status thoroughly. This is imperative to start mapping a long-term financial strategy. Begin by reviewing each financial statement such as bank and credit card statements, loans, mortgages, and investment portfolios. By meticulously tracking every expense, they will be able to have a clear view of their finances and know exactly where their money is spent on every month and only be collating their financial history are they able to plan for their next investment.

3.) Cutting Edge

With the rising inflation rate, cutting back on unnecessary spending may be the answer to increase our savings. How do we differentiate between what we need and what we want? For example, do we need that RM 13 cup of coffee at our favourite coffee joint or the designer handbag that is screaming out to us from the display window? What if we cut down on eating out and eat at home more often? Be conscious of these little expenses that may add up to a substantial sum at the end of the month. Imagine how much more we can save in a month if we do not spend on needless things!

4.) Dealing with Debt

A good advice to you and me is to pay off as much of the debts we have accumulated through the years as we can. Pay off loans at the exact date of each month. Credit card debt is one of the major source of setbacks to get ahead financially, so use it sparingly and only if the need arises Remember that the little piece of plastic, although convenient to use, may just leave them with more debt than they can handle. Sometimes, it is better to just to whip out the cash instead of using plastic. But if plastic is used, be very disciplined in servicing the debt on time.

Next up on Financial Fitness Tips - Part 2

Tactical Allocation Funds: Pros and Cons

Tactical allocation funds adopt a flexible investment mandate as investments are actively rebalanced between different asset classes in response to market trends, economic developments and valuation. Fund managers can take advantage of potential investment opportunities if the outlook for a particular asset class is positive while reducing its exposure when the valuation or fundamentals of the asset class are no longer attractive.

By allowing fund managers the flexibility to rebalance the asset allocation accordingly depending on the market outlook, it enables value to be added to the fund by taking advantage of prevailing market conditions. Tactical asset allocation funds can dynamically and actively respond to macro trends in both bullish and bearish market environments. During periods of turbulence in equity markets, tactical allocation funds may utilise index futures to hedge against market volatility. By being responsive to changing market conditions, these funds can be positioned for growth in times of market up trends and be positioned defensively in times of market down trends

However, the strategies employed by tactical asset allocation funds to shift the asset mix between equities, fixed income instruments and deposit may result in increased volatility of returns. Thus, these funds are most suitable for investor with very high tolerance for risk and who seek capital growth over the medium to long term. With a potentially large percentage of their NAV invested in equities, tactical asset allocation funds are exposed to higher risks and market volatility. In addition, investment decisions pertaining to asset allocation and hedging strategies undertaken by the fund managers may adversely affect the fund's performance if the strategies adopted are not in tandem with market movements.

In conclusion, tactical asset allocation funds are suitable for investor who seek potentially higher returns produced by dynamically shifting a fund's asset allocation mi based on the outlook for the various asset classes. These fund can complement and help to diversify an existing portfolio of funds held by investor with aggressive risk profiles. As always, investor should consider their own investment goals, risk tolerance and time horizon before deciding to invest in tactical allocation funds.

An Introduction to Tactical Asset Allocation Funds

Tactical asset allocation funds have the potential to maximise returns during periods of volatile market conditions.

Tactical asset allocation is an active portfolio management strategy that rebalance the proportion of assets held in a fund to capitalise on market trends. This strategy is suitable for investor with aggressive risk profiles and who are able to withstand high volatility of returns in pursuit of capital growth over the medium to long term period. Tactical allocation funds adopt a flexible investment strategy and give the mandate to fund managers to actively respond to changes in both bullish and bearish market environments.

In tactical asset allocation funds, which is also known as flexible or dynamics asset allocation funds, enable portfolio management strategy and rebalance their asset allocation between different asset classes of equities, fixed income securities and money market instruments depending on the market outlook. Tactical asset allocation funds have the widest range of equity weights when compared to equity and balanced funds. They adopt a flexible investment strategy that allows fund managers to take advantage of investment opportunities in the marketplace by actively rebalancing the asset allocation of the funds. Under the Lipper Global classification system, tactical asset allocation funds are categorised as mixed asset flexible funds.

When the market outlook is positive, fund managers may fully invest the fund's net asset value (NAV) in equities. However, when the investment climate is deemed unfavourable and weakness in equity markets is anticipated, tactical asset allocation funds may adopt defensive strategies by lowering their equity exposures to as low as zero by increasing investments in fixed income securities and liquid assets. If the outlook for fixed income securities and liquid assets is also unfavourable, fund managers may move the investments to deposits.

To optimise their returns, tactical allocation funds may also invest in futures contracts and options to hedge against market volatility.

Welcoming post on Trade and Invest Smart

Hi, Welcome to Trade and Invest Smart.

I am a full time trader and stock analysis in the Malaysia market. Throughout my 5 years journey, I had encountered different situation in the market, and different position as well. As the journey goes on, I had continue to improve myself while taking up on the experience and knowledge that I had learnt throughout my whole trading journey.

For a person who trades for a living, it is very important and essential to have a good and reliable techniques and strategy as well. Those are in no doubts, the very powerful weapon that will keep you going, while helping you to conquer the market as well. Throughout the whole journey, I had equipped myself with all the technical and fundamental tactics and strategy that is needed to sharpen up my decision making. While doing so, I start to realize that actually, there are more than just technical and fundamental analysis. Because of this, this is the place where I would actually like to share about the things that I had encountered.

It had been an interesting journey for me in a whole. In the coming days, I would like to share more on my own personal experience, as well as some other good articles that could be beneficial for your trading or decision making as well.

Do keep up with me so that I am able to update you with my latest information and updates.

Regards,
Garde