KUCHING: Investors are urged to be more cautious with their investment portfolios in light of a volatile ringgit and uncertain global environment.
With the ringgit plunging down 5.9 per cent last month to a record low of 4.3100 since January 1998, investors have been left skittish about their onshore investments and cash assets.
They worry that the current uncertain global environment will only further depreciate their assets, leaving them unsure about what steps to take next.
“From a financial and investment planning point of view, the first thing I would advise my clients would be to review the present unit trust portfolio they have and take profit on funds that they have invested in view of the heightened volatility,” said Lee Khee Chuan, director of Practice & Advisory Management, StandardFA for East Malaysia.
Lee, who is also a licensed financial adviser representative, said it was equally important for investors to devise a strategic investing plan to manage the downside of investing risks involved.
“Instead of lump sum investing, one would be wiser to look at averaging strategy to handle the downside risks such as dollar cost averaging and value averaging,” he advised the public.
Dollar cost averaging and value averaging, he added, are investing practices that seek to counter the natural inclination toward market timing by cancelling out some of the risk involved. Dollar cost averaging involves set intervals of small investments while value averaging makes investments that match calculated predetermined amounts for the total value of investment in future periods.
“While both methods are more suited to investors with a lower risk tolerance and maybe ideal for many considering our current financial environment, it is still essential to adopt a personal and case-by-case approach on portfolio review as each person’s investing objectives and circumstance are different,” he affirmed.
Looking towards the future of the ringgit, Lee said there are several factors that influence its performance such as oil price, economic fundamentals, investor confidence level towards the government and BNM policies, as well as external factors.
“In the short term, the ringgit’s volatility is dominated by external factors such as the fund flow directions awn well as oil price.
“This seems to be a positive sign as the recent Organisation of Petroleum exporting Countries (OPEC) decision to cut crude oil output has led to oil prices rally for their best week in the last five years, steadying above US$51 per barrel.
“Additionally, the newly implemented BNM policies have also shown promise to a recovering ringgit as it strengthened by 0.7 per cent against the US dollar to 4.4360 in the first week of December.”
On this point, research firm RHB Research Institute Sdn Bhd (RHB Research) expected the ringgit to recover gradually over time after this round of volatility, when global markets return to calm with more clarity from the Trump presidency.
Meanwhile, Ken Wong, an audit and taxation manager with Moores Rowland Chartered Accountants, does not see anything likely to push the ringgit any lower at this juncture as “the recent OPEC deal is likely to support the ringgit up till the actual results from this quarter are out.”
Despite this, investor confidence in the ringgit is still at an all-time low, with many Malaysians considering exiting their held Ringgit into foreign currency.
In response, Wong advised investors, “If you are still keen on exiting the ringgit, the US dollar would have the highest possibility to maintain its value but you’ll want to not have it all be in US dollar. I recommend diversifying your cash assets and not entering it all into one single currency.”
For investors looking to use the foreign exchange (forex) market or currency trading as an investing strategy for financial planning, Lee warned that it would not a good idea due to the high risk involved.
“It requires knowing the game as well emotional discipline to be a successful currency trader,” said Lee.