Recession in Malaysia – How to invest now?

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The financial markets went into some form of crisis due to the COVID-19 pandemic. Some markets boomed while others faced a recession. Malaysia was not spared and the markets became chaotic at some point.

Logical to invest now?

With an economic downturn, does that mean you cannot invest and keep your money in more stable accounts? Is there even any logic to invest during a recession? Should you sell out now and cut any losses in case the market gets worse? The thing about recessions or economic downturns is that you can still invest your money. After all, life has to go on but you might want to be more cautious with your money.

What do you need to do?

The most evident mindset you need to have during any financial crisis is to take fewer risks and to build your portfolio for the long-term future. This is the time to start building your emergency fund. What you need to do during these turbulent times is to prepare for the long-term future. When it comes to income, this is the time to ensure you have (and maintain) your stable income like a monthly salary. Investments should be something that can sustain you after you retire. What you want to achieve is to have some form of financial stability after you no longer have an income. The idea is to have a stream of income that will eventually replace your salary, although it might not be the same level.

COVID-19 Financial Affects

Because of the COVID-19 pandemic, global markets suffered a severe blow. Share markets, bonds, gold prices, cryptocurrencies and all suffered and that was one that no one expected. Most of these markets have since recalibrated and slowly recovering since March 2020. However, they are still not stable and a lot of people across the world are feeling the heat like loss of jobs, downsizing and share market uncertainties.

Some observers have stated that the world is currently in a recession and if it is anything to go by, a depression might just occur later. Putting all that in mind, how should your investments moving forward

Priority is to survive

A lot has been said about having an emergency fund. So, this is what you would need to do. Since there is no escaping the financial crisis, make sure your job is secure. In the meantime, build up your emergency fund to ensure you have enough to survive for at least 6 months in case you lose your job. This could also be important in case you get a pay cut. If possible, build your emergency fund to 12 months.

When should you buy?

You would have heard by now that there is no right time to buy. You cannot afford to wait until it hits rock bottom to buy and then sell when it starts to go up.

  • Level your investments – You should look at certain stocks and buy them consistently. This requires homework and calculation. If you are eyeing a certain stock, you cannot wait until it is at its lowest. You would need to buy a bit at a certain price, if it goes down, buy a bit more to level your price.
  • Look at other markets – If you have been investing in stocks, then it is time to broaden your horizons. Look at passive index funds or ETFs (Exchange Traded Funds). This is most possible through robo advisors as they will manage your money for you based on your risk level.
  • Long-term investing – This is surely not the time to be aggressive in your investments. Think for a longer term like 10 years. Take lower-risk platforms because of the uncertainties.
  • Manage your debts – Your investments should only use money that you have that you do not need. Avoid going into debts just because you feel a certain platform is good. Do not borrow money for your investments.

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