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Tuesday, October 30, 2018

How to Deal with the Market’s Ups and Downs

The most commonly asked question on investing - Is it a good time to invest? I would argue that anytime is the best time – not because I can answer correctly to the question but precisely because I can’t… and neither does anyone else. 

Study after study has shown that the vast majority of professional investment managers can’t successfully time or beat the market and the few that do happen to outperform aren’t able to consistently to do so.

So what does this mean for you as an investor? Trying to time the market is probably a waste of time that will likely backfire. The irony is that investing is so complex that your best bet is to keep it simple by following these three steps:

1) Invest according to your risk tolerance.

Risk tolerance comes in two forms. The first is how much risk you can afford to take, which is largely a function of when you might need the money. Anything you might need in the next 1-3 years (savings for emergencies, a vacation/holidays in the next year) should be kept safe in cash. Beyond that, the longer your time frame, the more aggressively you can invest in the market, which are extremely volatile in the short run but are less likely to lose money the longer you hold them (assuming you’re well diversified).

The second is your personal comfort level with risk. How do you feel if your portfolio turns red? After all, if you can’t sleep well at night when your portfolio falls in value, you may be tempted to cash out and miss the recovery. The more conservative you are, the less you may want to have in stock market and vice versa.

2) Reduce your costs.

Regardless of which investment you choose, you’ll want to look for ways to reduce your taxes, fees, and transaction costs. To reduce taxes, make sure you’re utilizing Private Retirement Scheme (PRS) with tax relief up to RM3,000 and even Skim Simpanan Pendidikan Nasional (SSPN) with tax relief up to RM6,000 for those with kids. 

As for unit trust or mutual fund costs, a Morningstar study found that low costs was the “most proven predictor of future fund returns” when comparing similar funds. Regardless of the types of unit trust fund, you’ll want to pay attention to the fund’s sales charge and switching cost. The former is what the fund charges you every upfront investment (some can goes as high as 6.5%!) and the second is how much it costs when switching between funds. You can generally minimize both by investing using Wrap Account (as low as 2% sales charge and free switching!).

The same holds true when choosing an advisor as their advisory fee will come on top of any fund fees you’re paying. Most unit trust agent collect a commission from selling high-fee funds or charge a percentage of the assets they manage for you. Both can be expensive and present conflicts of interest. Instead, look for unbiased advisors that charge a flat annual, monthly, or hourly fee as this can be both cheaper and less biased.

3) Stick to your plan.

Once you’ve created a suitable to yourself and low cost portfolio, the most important thing you can do is to stick with it. You may be tempted to jump onto the next hot investment fad (dot com stocks in the 90s, and then real estate, and more recently cryptocurrency), chase top performing funds or strategies, or bail out during the next bad news or market downturn, but any of these actions can badly affect your portfolio returns

If you can’t help yourself, put aside some “play money” you can afford to lose by speculating and consider hiring a financial advisor to talk you out of a bad decision with the rest of your money.  Financial advisor can help you to stick with your portfolio when the going get rough. (Vanguard estimates that this “behavioral coaching” can boost your returns by 1.5%.)

This last step may be as simple as the others, but it’s not easy. The hardest part of investment management isn’t when or what to invest. In fact, it’s not about managing investments at all. It’s about managing ourselves!

Henry Tan, CFP®, Shariah RFP, is a Licensed Financial Advisor at #YourFinanceDoctor. For speaking opportunities on personal finance issues, please email


  1. Agree! But people will easily change their previous plan with a new one when difficulties come..and i am one of it..huhu


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  2. oh ill prefer to go more down to earth less these dunia things.. but i made an investment for long term especially house and simpanan.. not prefer to semak my head especially with this kind of high living cost ;( i am not so good investment btw thanks for shating this..

  3. Oh! I until now do no how to exactly invest. But thank you for your article, now i know little bit about investment. And hopefully in the future i manage to invest in property or money

  4. NIce article, before reading this, i just know about housing investment only.

  5. these are very good tips.. and yes, i do agree.. most important is to reduce your taxes, fees, and transaction costs! people need to be more aware about investments and not fall for schemes that claim u can get untung/rich fast!

  6. I am interested in active investment but never doing one until now. I know there are lots to learn before doing so. Thank you for your article, I hope I can learn more about this.

  7. Thank you for sharing this u. InshaAllah i'll invest for a good life in the future. Mostly,everyone for now already known how to invest for life and thanks again for this article again ❤️

  8. nice sharing. think everyone should know the right way to invest. Find the right time, find the right method

  9. Perkongsian yang sangat bagus, cuma buat masa sekarang ni sis belum mampu nak melabur di mana-mana pun, zaman gawat buat takut tanggung risiko kehilangan

  10. Saving tu penting. Emergency nak guna senang dah ada simpanan. So far tak berani invest sebab tak pandai.hehe. cukup buat simpanan je.. anyway nice tips. Boleh jadi rujukan ena in future.

  11. High risk high return, but we need to understand the trends as well. Nice sharing. I got lots of knowledge here. Keep sharing

  12. Tak berani nak invest apa-apa, sebb sayang duit. Selalu simpan duit di tempat yang boleh beranaakkan dia jadi banyak..haahaha..But this nice tips..can share with other people yang suka invest tu

  13. World nowadays is not same like previous. Anything or everything we want to do, we need to think twice. Cannot simply want to try and error. We have to look at many side include of positive and negative taught. You have share the very informatice article here. I agree with your point. Great tips!

  14. I dont really know about investment but your posting make it easy for me to understand. I do think its about time for me to look into investment as well tho.

  15. As a student, i am not really pay attention to invest yet but i am always interested to know about investment in property and would love to invest on it someday. Thank you for the article. It is really good tips about investment

  16. Usually I would just rely on my agent to help me to deal with my investment. After all I am not an expert when it comes to investment and what not.

  17. thanks for your tips. I do wish to earn more money from invest in the market. I must put more effort to learn and earn more from now onwards hehe. Pray for a good year!

  18. Bagus perkongsian article macam ni. Apapon untuk buat investment kita kena ada ilmu dulu dan yang penting jangan terlalu melulu

  19. I'm not so good in investment. But now only have investment in property n unit trust.

  20. invetasi perlu analisis yang panjang tapi itulah seni investasi selalu ada high risk dan high return

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