MANAGING finances is a very personal thing, and financial consultants and planners will tell you that different people have different risk profiles and criteria where managing their finances and investment is concerned.

Investors today have a number of financial products to choose from to fit their risk profile and criteria for returns and one of the more straight-forward ones is the unit trust fund.

A unit trust fund is an investment trust formed to invest in a portfolio of securities in which retail investors can participate by buying units of a fund. The trust fund is managed by professional fund managers.

However, investors may be put off by unit trusts due to the current turmoil in the equity and financial markets. Furthermore, unit trusts require long-term investment and patience, which at this point is a hard-sell because of the volatility of the markets.

In fact, according to the Federation of Malaysian Unit Trust Managers’ (FMUTM) website, the industry has seen its net asset value (NAV) drop by 20% over the year to RM135bil as at Oct 31, 2008.

However, the FMUTM says concurrent with the drop in the NAV, the industry NAV compared to Bursa Malaysia’s total market capitalisation increased to 20%.

This may be due to the KLCI having dropped 39.84% year-to-date because of the impact of the economic slump and the financial crisis that took a turn for the worst in mid-September when Lehman Brothers Holdings Inc collapsed and American International Group Inc needed a bailout.

A worker is seen carrying a box out of the US investment bank Lehman Brothers offices in the Canary Wharf district of London after it collapsed. – Reuters

Several financial planners StarBizWeek spoke to recently counselled that dollar-cost averaging or investing a fixed sum over a long period is the trick to reducing exposure to risk rather than making a single large investment.

The idea behind this is that the fixed sum can be spent on investing in a portfolio regardless of the price because the investment will eventually balance out in terms of cost.

These experts have heard stories of how investors have put all their money in one basket, thereby violating the most basic of investment rules, which is to diversify into different asset classes and also to diversify within a particular asset class.

In this respect, unit trust funds are generally divided into three types – fixed income, balanced/diversified and equity unit trusts.

“It all falls back on why you want to invest,” CTLA Financial Planners Sdn Bhd managing director Mike Lee said. “If you feel that the 5% dividend on average that you’re getting from the Employees Provident Fund (EPF) is not enough, than you may want to take a bit of a risk by taking money out from the EPF and invest long-term in unit trusts,” he says.

Lee says the issue is what type of unit trust to invest in. “At this point, due to the volatility of the equity markets, it is better to put more money in fixed income or balanced trust funds. I would advise to put at least 80% into fixed income,” he adds.

Lee says another way to secure a fairly stable income but that involves more risk is to invest in a mix of unit trusts where fixed income make up half the basket, balanced unit trust funds made up 30% and equity unit trusts made up another 20%. “This way you’ll be able to get a gross return of 7% to 8%, which is fair considering the fact that the KLCI is down by nearly 40%,” he says.

Lee says investing in the mix will allow for some risks and conservatism without speculating or trying to time the market. “At the same time you don’t want to miss the boat,” he says.

Gary Low, a senior financial consultant with Great Eastern Life Assurance (M) Bhd, says Malaysians in general prefer to invest in short-term, high-risk products that give higher returns than conventional savings such as fixed deposits or EPF dividends.

“You need to have invested at least five years before you can see any meaningful returns,” he says, adding that in more financially-matured markets, people invest for at least three years.

Low says a lot of people here are aggressive in their investments even though they say they are conservative. “These investors, if they had put their money into equity funds, would have lost it since the KLCI is down up to 40%,” he says.

“It’ll take them the next five years just to break even assuming an average 8% return on investment,” Low points out. His advice is to put 80% into fixed income and the rest into balanced trust funds. “Lets wait and see what next year would be like,” he says.

WILL the year of the Ox be better for financial markets?

Typically, the Ox signifies prosperity achieved through fortitude and hard work.

The Ox is unswervingly patient, tireless and capable of enduring hardship without complaint. So, it is less surprising when JP Morgan chief Asian and Emerging Markets Equity Strategist Adrian Mowat says that the Ox holds better prospects than the Rat.

So strong is his conviction, that at about this time next year, he says investors will be having a banquet because equity markets have improved, and investors are feeling better about life.

“2008 was a horrible year for investors. The D word was not decoupling, it was deleveraging,” says Mowat.

Hence, just when everyone is giving up on fundamental analysis, Mowat says, it’s time to pay even closer attention.

Now, he says, is the best time to look at equity markets, as confidence is low and economic data have yet to show an improvement.

“You want to own equity. Come Chinese New Year onwards, you need to be having the right stocks. You need to start looking at stocks with resilient earnings. When the turn comes, the dispersion is going to be very high. Get out there and do the analysis,” urges Mowat.

He says Asia is right smack in a situation where there is a crisis happening in the West, hence asset prices in Asia are suffering.

“Investors can now buy stocks with good earnings stream at heavily discounted prices because of the crisis in the West. This crisis only makes the Asian economy stronger. Emerging markets will outperform other markets,” he says.

On a valuation basis, stocks are now cheaper than they were during the Asian financial crisis and the tech boom bust.

When the recovery sets underway, price earnings (PE) of stocks will trade above their discount levels.

“We’re potentially going to be seeing large dispersion of returns. This is going to be good for equities,” he says.

Mowat says investors are seeing the worst down leg this quarter.

The first quarter of 2009 won’t be as bad as this quarter.

He sees the recovery happening below potential growth rates because the US will be in the process of rebuilding its balance sheet.

“Yes, we’ll still be seeing bankruptcy and defaults, but these are lagging indicators and have already been priced in.

“What we’ll be seeing is a stabilisation of policy in the US. Incoming US president, Barack Obama has been quick to announce the people for his administration.

“This gives the market some comfort, and also helps confidence,” he says.

Mowat says it won’t be a surprise if technology stocks make a comeback.

As expectations in the sector have been so beaten down, it takes only a small change in demand to see a big difference.

“Technology stocks in emerging markets will return, and it won’t need to wait for demand from the US and Europe to return,” he says.

He advises investors to stay underweight on the cyclical and material stocks as in current times, one needs to invest in resilient companies.

“Companies that say, yes we are affected and we’re modifying our plans to cope with the challenging environment – buy these companies.

“Companies that say, no we’re not affected – sell these companies, as they have no sense of realism!” says Mowat.

Recovery soon ...

Emerging markets may be seeing a powerful V shape recovery in the making. Boosting this recovery is an environment of lower interest rates and fiscal stimulus policy.

He says the world is cyclical, and 2008 is what he calls the big ugly experiment.

In the US and the developed economies, consumption was holding up pretty well until the recent quarter.

Initially, US exports were holding up due to the growth in emerging markets up until the final quarter where demand and growth dropped.

He says the economy was losing momentum because of the measures taken to counter inflation.

“The derating happened because of a monetary derating policy, and we subsequently saw declining industrial production. Companies needed to get rid of their inventory. How do you do that? You stop production,” says Mowat.

The problem was made worse with the credit crunch unfolding. It was harder for companies to get letters of credit and working capital to finance their operations.

He says what investors are seeing so far is government policies responding to the market turmoil, and these include aggressive monetary policy and fiscal stimulus such as tax cuts.

When it comes to some of the measures taken, Mowat cautions to be careful of new infrastructure projects that are only just beginning.

“If these projects were only just implemented, it’s not going to make a difference until 2010. So unless they have already started, the people aren’t going to feel anything.

“If governments announce an infrastructure project, be critical. Make sure it can make a difference.

“Tax cuts are more important because it puts more money in people’s pockets,” he says.

An important indicator he notes is that in the last few months, investors have been in a situation where equities were dropping as economic data were worsening.

The cycle has now changed where capital markets are improving even as economic data had yet to improve. Inflation is also no longer an issue.

“We are now seeing a V shape recession. Things are beginning to improve. We’ve seen the worst selling in October. I think its time to position oneself in the market,” says Mowat.

“Don’t be surprised if markets are 50% higher in 2009 as we see a gradual normalisation of risk appetite. I don’t believe in paradigm shifts. I believe in long and short term cycles.”

Mowat, who tracks China closely, says that the biggest risk is if China fails to respond to its four trillion yuan stimulus package. However, he believes, the Chinese economy will respond.

Countries in financial surplus, he says, will clearly have a funding advantage as it means they have not over borrowed or over consumed.

With emphasis on that, Mowat favours China, Singapore, Taiwan, Thailand and the Philippines. On the other hand, countries in a savings deficit namely India, South Korea, Russia and Indonesia, he says, may see a “very uncomfortable credit cycle.”

“For emerging markets that have relied too much on commodities, you’re going to be seeing growth that was initially supernormal to almost non-existent.

“I worry about material and energy stocks. These are stocks from the last bull market and a lot of people still own them,” says Mowat.

Malaysia good but unlikely to lead

Malaysia will unlikely be the leader in this recovery. China will lead the story as it makes up some 30% of emerging market’s GDP.

In Malaysia, Mowat sees an acceleration in loan growth, aided by lower interest rates.

He says Malaysia is in a good position, as it has a meaningful surplus, and also the flexibility to adjust its monetary policy.

“It’s a story of pent-up demand, and the fiscal benefits that are coming through.

“Consumers now have more money to spend because of the lower petrol prices. Confidence is returning and the political risk aversion has also reduced,” says Mowat.

He says the stock market is typically 3 months ahead of the economy.

At end 2007, equity markets were falling when data were still strong.

“Right now, equity markets are climbing while data are still weak. So maybe the recovery is already happening.

“In Malaysia, I feel that the political risk is already priced in, hence the market may even surprise (to the upside),” Mowat says.

He is neutral on Malaysia. This is because when the recovery takes place, funds normally head first to the big liquid markets.

“Malaysia also has the issue of uncertain politics. For some of the commodity companies, you may see a very dramatic contraction in profits,” says Mowat.

“As countries move to a zero interest rate policy, what we’re seeing is a situation of the wheels spinning, but no traction because the appetite for risk is zero.”

“As risk appetite increases, we’re going to start seeing the ringgit appreciate. We’re now seeing a low point in currencies but by mid-2009, I see an improvement,” he says.

Mowat says redemptions are not leading indicators of an economy.

Nonetheless, with the amount of outflows Malaysia has seen, it’s equal to the 2006 and 2007 outflows combined.

So in essence, Malaysia is back to 2005 levels.

“Equities on SALE!!!” – screamed most stock markets earlier this year. “Equities – Further Reduction!!!”, the announcements continued into mid and late 2008, yet, investors watched from the sidelines. In retrospect, waiting was wiser than jumping in. What about now? After all, many stock markets have already lost more than half their values!

You, the rational investor, are thinking it’s crazy to buy now when stock markets are in a pool of red.

Alternatively, you, the ultimate bargain hunter, are waiting for the sign that says, “Equity on Final Sales, last 3 days only!”

It is exactly what millions of other investors are thinking as well. So when is the best time to buy so that you are buying at the low?

But then, when can we expect equities to be at their cheapest?

They are cheapest when the market is at its “worst” or the outlook is at the “bleakest” – where it is impossible for things to get any worse.

Let’s cast our minds back and think of the world economy after the technology crash in 2000, Sept 11, 2001, Enron and Worldcom crisis in 2002 and the Asian SARS episode in 2003.

Each crisis seemed to signal the end of the world as we know it. This crisis is no different! SARS caused the Asian markets to plunge but shortly afterward, they shot pass their previous highs.

If you had waited because you thought that SARS would plague Asia for a long time, you would have missed out on some of the most spectacular growth. Does it mean one should just take an early plunge during a crisis?

Then looking back further at 2001 after the technology crash – one could have easily believed it was the “final sale” and entered the market then.

Unfortunately, the markets continued to be shocked by acts of terrorism (Sept 11) and then betrayed by corporate giants like Enron and Worldcom.

Even the most rational investor who bought at these perceived low points may call it quits.

When the situation could not get any worse, it just did! Does it mean one should just wait and see? After all, I did describe the current crisis as the “First world financial tsunami” – have the waves stopped or is it an interlude before the next big one?

The equity market is like a roller-coaster ride, as it plunges headlong into a great fall, investors will lament and throw their hands up in despair.

A friend of mine jokingly said that her long-term investments may now be so long term that they would only benefit her grandchildren.

Are you prepared to buy when the situation is bad, so bad that it cannot get worse? That, by definition, is to buy at a low and maybe even the absolute lowest point.

Unless you are still on the roller coaster, you will not be able to enjoy the upswing when it passes the bottom of the great fall. And if you choose not to be on the roller coaster, then don’t complain that you are always unable to buy at a low.

In fact, the stock markets have always recovered months before the real economies hit the bottom.

A sensible approach is needed, coupled with great mental and emotional strength to overcome the fear of loss in such instances.

While it is silly to buy simply because markets are falling, sticking to fundamentals does work. Buy in anticipation of future re-growth at reasonable prices and persevere through possible set-backs – this is likely to succeed over the longer term.

If you have what it takes, I would suggest a regular drip into the market.

For example, if you have RM100,000, divide it into 10 lots of RM10,000 and then invest each lot into the market monthly. As you ride the market down, you can be assured that you are buying cheaper.

Of course, the best outcome is that, in the course of such regular investing, you manage to “catch” the bottom.

As I always believe, if you get value for your money, then you don’t have to worry about whether it’s cheap or expensive.

Tay Han Chong is senior vice-president and senior head of division, Personal Financial Services Division, UOB

IN July, families were wondering how they were going to make ends meet once the price of petrol bolted to RM2.70 a litre. The fuel hike caused prices across the board to surge and people had to redo their budgets to cope with higher costs.

The days of budget adjustments, sadly, are not over. In fact, things are taking a more serious tone. The subprime-induced US recession is now wreaking havoc throughout the world and families are now bracing for tougher times.

Job cuts, wage freeze and cost-cutting measures have accelerated as companies are being hit by what many consider to be the worst economic downturn since the depression of the 1930s. This also has an effect on families, especially when uncertainties might surround the job security of a family’s breadwinner.

“Some readers will definitely be retrenched in 2009. While it is likely the total number of unemployed in Malaysia will be relatively low compared to those now losing their jobs in the developed world, to the affected that will be no comfort whatsoever,’’ says Rajen Devadason, a licensed financial planner with MAAKL Mutual Bhd. He is also CEO of corporate mentoring consultancy RD WealthCreation Sdn Bhd.

“Therefore, it is crucial that while there is still viable employment, household breadwinners decide now to adopt a well-thought out budget that will help them preserve cash.’’

While there is limited room to cut expenses for most people, Devadeson says what is often more pragmatic is to simultaneously try to increase sources of income.

His four ideas are:

·Utilise EPF’s Account 2 options to reduce the principal sum outstanding on existing home loans. If possible, pay off the home mortgage as fast as possible.

·In homes with multiple cars, consider selling – quickly – any extra vehicles. If the older cars which are fully paid for are still in reasonably good shape and capable of running safely for at least another three years, then it makes sense to keep those and to sell the newer cars if doing so generates sufficient cash to pay off the existing hire purchase loans.

·Encourage teenage children to work around the neighbourhood by doing chores for cash. Urge them to contribute their added earnings into a family pool to build up cash reserves.

·In single breadwinner households, if the children are old enough to fend for themselves, having the traditional caregiver, usually the wife, also join – or rejoin – the workforce will be helpful in increasing cash inflows into the family coffers.

“Whatever unutilised additional cash flow generated should be channelled into a safe interest-bearing bank account or into a money market fund to build up an urgently needed family cash reserve buffer,’’ says Devadeson.

There is chance that the number of available jobs in 2009 may contract and if getting additional employment proves difficult, Devadeson suggests that people start a small family business.

“In really tough times, common options include running a food stall, washing cars, baking and selling cakes and cookies, cleaning houses, gardening and giving tuition,’’ he says.

He adds that many people will find such viable cash-generating options beneath them but such pride is something to be dispensed with during the tough times.

“Also, unnecessary expenses need to be slashed before doing so becomes unavoidable because of a job loss. That way extra cash can be channelled into savings even while normal income continues,’’ he says.

“As savings grow, the option to judiciously invest in ever cheaper cash-generating investment assets as the economy worsens will rise. Eventually, doing just that will plant the seeds for long-term future family prosperity in 2010 and beyond.’’

Abacus Advisory Sdn Bhd founder and CEO Carol Yip says the upcoming lean times will be an opportunity for families to take stock of what they have and to make substantive changes.

Yip says a family is like an organisation in which each member has an important role to play, and families should sit together and discuss any financial issues they face. “This can be used as a chance to educate your children and set financial goals for them,’’ she says.

Yip also says simple cost-saving rules such as switching off lights, cutting down on electricity and Internet usage could be set. “Families can use the money they have saved instead of their bonuses to pay for their next holiday,’’ she suggests.

She says parents have to lead by example, and practise what they are telling their children. “Action and behaviour is as important as words,’’ she says.

Another important advice is that both parents have to be on the same page. There is no point in one parent making the sacrifice while the other is out buying a second widescreen TV for the house. “Both parents must have common goals in savings and cost-cutting,’’ she says.

The fastest way to save as a family is to look at the activities the family does together. If a family goes out often to have expensive meals, a fast way would be to cut back on that.

The next tip to parents is to reassess the children’s extracurricular activities. “If parents are sending children for, say, piano lessons for the parents’ own fulfilment, perhaps they might want to reconsider if the child does not have any interest in pursing learning such an instrument,’’ she says.

A sensible thing might be for the non-working parent or an existing parent to take a second job should finances take a dip, but Yip says that might not be so easy. Firstly, a downturn means fewer job opportunities. And if one were to find employment, it could have an effect on family ties.

“It depends whether children are understanding or not. Some might feel more appreciative of the sacrifices being made by a parent to support the family,’’ she says.

Other issues will revolve around providing medical care for aging family members and a downturn might mean seeking cheaper but not necessarily lower quality heathcare.

“Family members also have to be aware of the current state of financial affairs in order to make a decision on what to do when an emergency arises,’’ she says.

the Star-By JAGDEV SINGH SIDHU

IN times like these, where a combination of the credit crunch and the economic slump has affected the private wealth of many individuals and families, the need to preserve the sources of wealth becomes more urgent.

Whitman Independent Advisors Sdn Bhd managing director Yap Ming Hui, whose clients are mainly business owners, says the most important thing to do in times like this is to make sure the business cashflow is preserved.

“In this situation they have to review their position, maybe do a stress test analysis depending on how much revenue is coming down and think about how to protect their assets,” he says.

Yap says these individuals need to protect themselves first before they make more money.

He says for business owners, insolvency becomes an issue in such times especially if they stand personal guarantee for loans their companies take.

Yap says one sure way of preventing wealth being wiped out in the event of a bankruptcy is to move part of an individual’s or family’s wealth into a trust managed by a professional.

“In the event of a slump in revenue, which is inevitable at this point, standing personal guarantee for business loans becomes an issue because the person may not be able to repay,” he says.

Yap: Diversifying investments is more important at any time but even more so now

Yap says a business owner may have to also worry about any credit or loan policy changes when times are bad.

“A change like this, usually by tightening the rules on lending or pulling back of credit lines, can have an adverse domino effect on one’s business and bankruptcy may follow,” he adds.

Yap says many business owners are unaware that when they take loans, there is a “material adverse market condition clause” in which a bank may reduce or place more stringent conditions for its lending facilities.

He says for those who transfer part of their wealth to family members, they must ensure that those family members are not directors or partners in the company as they will be liable.

“It’s always better to have a trust but if they don’t have a professional managing their wealth, then maybe its time to review their protection plan,” Yap tells StarBizWeek.

From safeguarding the sources of wealth, he says individuals can then think about investing.

However, Yap says investors will have to set aside at least six months to a year of funds for everyday expenses and the occasional splurge before they start looking to what or where to invest.

He says the remainder can then be used for investing as long as its not needed for anything else such as sending kids off to college.

“Cash is king but investors must know to seize the opportunity when they see it, especially where investment opportunities are abundant in this kind of environment,” Yap says.

He says of all the investment choices out there, the one that is most obvious will be the equity markets due to the deep discount although investors will have to invest in “deep-blue chip” stocks for three to five years to see any sort of decent returns.

“These are the stocks that will always be investment targets by funds, even though they may have exited for now, but when things pick up, they’ll always be the first to move,” Yap says.

He says the more sophisticated investors will look to invest in the equity markets abroad for the reason that the discount is even bigger.

“The investor will have to be able to hold for a time, its not for the faint of heart,” Yap says.

Which brings him to the question of the time horizon. “I always believe that wealthy individuals do not have to put themselves at risk by growing their wealth exponentially within a short period of time via speculation,” Yap says.

He says as long as wealth grows above the inflation rate by 2% or 3%, it is good enough. “You’ll have done justice to your wealth,” Yap says.

He says diversifying investments is important at any time but even more so now.

“Diversification may mean sacrificing some returns but it will reduce risk,” Yap says.

He says always put cash in several different banks and if taking up a life policy, try to spread it over several policies.

“When I advised people five years ago about this, everybody thought it was troublesome, that it was going by the book, but look at the number of bank failures now, look at AIG,” Yap says.

Ultimately, he says any time is a good time to plan ahead when managing personal wealth.

“Don’t wait for times like this, because if you ask me, it may be too late if you’re planning for the downturn to come,” Yap says.

He says the best way an individual or family can solve personal wealth management issues is to have an updated plan so that they will know where they stand when adverse news of the type that is so prevalent in the media now comes up.

“They must know whether the bad news is relevant to them, whether it will affect their wealth in any way, it may be bad news to others but good news to them, they cannot also assume that opportunities highlighted in the media or through other channels of information are opportunities suited to them,” Yap says.

The Star-Fintan Ng

THERE was an air of confidence in Adam when he graduated from university with first class honours. He was now well prepared for the real world where he had to earn his own money.

Adam started his career in one of the big five accounting firms. He was paid a starting salary of RM2,500 per month and with overtime and other claims, he was able to earn an average of RM3,000.

This time, Adam had more disposable income in hand and decided to review his budget.

In Adam’s revised budget (see table), he put “savings ” as the first item under his “expenses” column. This is in line with the principle that we should always pay ourselves first.

Therefore, he continued with the unit trust investment but topped it up to 10 per cent of his salary.

In fact, some financial planners would recommend saving half the income. This is inclusive of the mandatory EPF contributions from both the employer and employee which amount to 23 per cent.

This means that you have to save another 27 per cent of your gross income to meet the 50 per cent target.

This may be tall order for most people, especially those with children, but this is the sacrifice we’d have to make for a comfortable retirement.

Second on Adam’s list was repayment of his PTPTN loan. As a responsible graduate, Adam started repaying RM150 each month as soon as he received his first pay cheque.

As Adam was staying with his parents, he was able to save quite a lot on rental.

So he decided to give his parents RM250 each for food and lodging.

Another RM500 was set aside for meals outside home, mainly for lunch and dinners when he has to work late. The estimate was RM20 per day for 25 working days.

Adam also set aside RM500 for clothing and entertainment as he would most likely go out with his colleagues, and a night out can easily cost RM100.

Adam would like his own wheels, decided to save up a little bit more in order to put down a larger down payment for his first car.

For now, he would rely on public transport.

He got himself an integrated travel pass for public buses and LRTs for RM135 per month. The transport allocation was increased to RM200 to cover taxi rides now and then.

Adam also set aside RM100 for his handphone bill.

After taking into consideration all his foreseeable expenditures, Adam found that he had RM300 per month to spare.

He decided on an insurance policy and the monthly payment came to 10 percent of his salary, a sum that was well within his budget.

When Adam was sent on an audit assignment, he met a familiar face that set his heart a flutter. It was Aida, a finance executive at the bank that Adam was auditing and she recognised Adam.

They were university mates and had not met or communicated since graduating from university.

Aida was a business graduate and they were staying in the same hostel.

At times, they would walk together with other friends to the faculty but never had they gone out alone together.

AKPK

Now is the time for investors to buy battered stocks as the global financial crisis is expected to retreat by the second half of next year, an equity strategist says.

"We have seen the peak of selling (of the stock market) in October," said JPMorgan Asian and emerging markets equity strategist Adrian Mowat at a briefing in Kuala Lumpur yesterday.

The stock market, which took a beating in October, following panic-selling in global markets, led the local benchmark Kuala Lumpur Composite Index to a four-year low.

Valuations are cheaper compared with previous crisis, he added, but investors are staying on the sidelines.

"Malaysia is unlikely to be a leader in recovery because international markets tend to go for markets with more liquidity and China will lead the story," Mowat said.

Business Times-Rupa Damodaran

GEORGE TOWN: While the government is encouraging spending to stimulate the economy, Permodalan Nasional Bhd (PNB) chief executive officer and president Tan Sri Hamad Kama Piah says savings in the form of unit trusts would go a long way for the future.

Over the past month, PNB has issued RM2 billion worth of units in Amanah Saham Nasional (ASN), Amanah Saham Wawasan (ASW) and Amanah Saham Didik (ASD).

Hamad said while those with money could spend as encouraged by the government, there were others with less who wished to save up slowly.

"As long as you spend your money effectively, it would help the economy," Hamad said after giving a lecture titled Navigating the Rough Ocean at Universiti Sains Malaysia's School of Business Studies here yesterday.

Hamad said with the RM2 billion raised from the unit trusts, PNB would be able to invest effectively with the prevailing low prices.

"Our unit trusts have always been well received. Last week, when we launched the RM1 billion units of ASN, they were snapped up within 3.5 hours. A week earlier, the ASW worth RM490 million was finished in six hours while the RM455 million ASD was also snapped up fast.

"If there is a requirement, we will launch more," Hamad added.

Earlier in his speech, Hamad said there was no direct danger of a financial crisis in Malaysia as seen elsewhere due to the active efforts of the government during the 1997-98 financial crisis.

"Then the banks had to address a situation of overlending and bad loans. Due to the active efforts of the government, our financial institutions are now much stronger in capital, and far more prudent in lending and investing.

"There is no issue of lack of trust or confidence and our housing market did not undergo the type of bubble market seen elsewhere," he added.

Hamad said the problem for Malaysia was not so much contagion from the financial crisis, but the slowdown in the economies of the West that would have an impact on its international trade.

Hamad said with exports being the key driver of the economy especially after the 1997-98 crisis when the depreciation of the ringgit helped make Malaysia's exports more competitive, the recession affecting the US, Japan and Europe, which are Malaysia's major trading partners, would have a negative impact on exports.

"On the other hand, our economy has seen strong domestic demand over the last three years particularly in the services sector.

He said the additional RM7 billion spending by the government, with the reduction of the overnight policy rate from 3.5% to 3.25% and the statutory reserve requirement from 4% to 3.5%, should help support the economy.

He said the Malaysian banking system, particularly commercial banks, was well-positioned to survive the expected downturn in economic activities, with strong capitalisation, sustained profitability and continued improvement in the level of non-performing loans.

"Given their sound balance sheets and ample liquidity in the financial system, banking institutions remain well positioned to meet the financial needs of the economy," he added.

The Edge Daily- Regina William

ALMOST all Malaysians, or 93 per cent, are aware that they need financial planning and banks that provide easy-to-understand products are in the best position to capitalise on this, according to a survey by British insurer Aviva plc.

The top three features Malaysians look for in financial services are fast and efficient service; advice and help they can trust; and information that is clear and easy to understand.

The Aviva 2008 Consumer Attitudes to Savings Survey found that the proportion of consumers who sought advice on a pension or retirement savings plan increased to 48 per cent this year, from 35 per cent in 2004.

CIMB Bank Bhd recently launched EasyLife Solutions, a range of easy-to-understand insurance plans underwritten by CIMB Aviva Assurance Bhd.

It aims to meet customers' changing insurance needs at different stages of their life.

For example, a young married couple can opt for the EasyLife Men's and Women's Plan and add on the EasyLife Kids when they have children.

Financial advisers are also on hand at CIMB Bank's branches to advise customers.

The Secret to Wealth

Whether you want to invest in shares or across a broad range of asset classes, unit trust funds provide you with one benefit that can be very hard for individual investors to achieve - diversification.

Many people invest but only some become wealthy. Why?
The mistake many people make when investing is that they treat their investment as saving.

Saving Versus Investing

So what is the difference between saving and investing? Saving is what you do to build up funds for something, like a holiday, and when you have the amount saved you withdraw your capital from your investment and spend it on the holiday. After the holiday you have nothing left, and start the process all over again.

But building wealth is different. People who want to build wealth invest their money for the long term in ‘growth assets’ such as shares and property.

Their strategy is to spend the income that the investment produces, but to leave the capital invested. They don’t withdraw the capital, so it stays there growing and compounding, and producing more and more income each year.

If you do this it will take you quite a while longer initially to get to your investment goal , but in the long run you will find that the extra wait has been worth it. As the years go by, you will have an increasing additional income stream from your investments and your standard of living can rise accordingly!

Should I continue to retain capital in retirement?
Retaining your capital is a good strategy to use for wealth accumulation. Of course when you stop working later in life, your strategy may change. At that point it can often be beneficial to start drawing on some of your capital as well, whilst still ensuring that it will last for as long as you need it.