2018 Financial Review

2018 was the first whole year I've lived in Malaysia since relocated from Europe. It's also the year with the most financial movement.

Victories

Beginning of the year, I received confirmation at my job with a salary increase. Not a big increase, but good enough, followed by bonus beginning of the year. It always helps to earn higher income as you'll have more jiggle space in your finance. The five years I was away pursuing an advanced degree has benefitted me with almost doubling my salary. Net accumulation in 2018 was approximately similar to net accumulation during my first 6 years of working. Thus, the advanced degree has and is paying handsome return.

Another important milestone I've achieve is that I've really look at my finances. Previously, I only did something similar twice a year: for tax filing and for tithe calculation (when I decide to pay it). Now I track my finance with more details across more aspects. I read somewhere that if you were the owner of a company, would you make yourself Chief Financial Officer? And now make that company is yourself.

Seeing it that way transformed my view of how important it is to track my own finance!

I now track 1) my assets, monthly; 2) my spending, almost daily; and 3) my investment in the stock market, monthly.

For expenditure, I'm only capturing on most days, and mostly for major items, as it's almost ridiculous to track every single sen everyday (I actually did that in October) – I need not to be such an asshole to myself. This is okay for me since I know my monthly expense range, and I'm naturally not a high spender. For income it's easier to track as I only have a handful sources of income: salary and dividends from stocks, other sources are rather minor. Hopefully I will grow more income sources, and I'm currently looking into my options.

I've also started to diversify into more aggressive asset classes; more importantly, invest directly in equities. This is in contrast to keeping everything in Tabung Haji, Amanah Saham Bumiputera, or in savings account like I've been doing previously for years. It also helps a lot to have a friend that you've known for a long time that happens to be a certified financial planner (though technically I only talked to him about finance in very early 2019). I just learned from a certified financial planner (CFP) friend of mine that Amanah Saham Bumiputera can be classified under "Cash" equity class as it is government guaranteed. If that's the case, then probably Tabung Haji as well (my decision to start to diversify was waaay waaayy before the scandal broke out). So actually, I've been hoarding everything in cash!

Still, these two investment vehicles do give consistently rather decent return at 5 - 7% annually.

Whether you should reclassify these two asset classes is up to you. Please do your own due diligence before making any financial decisions.

Additionally, I've started investing in the most important vehicle ever: myself. I now read, listen to podcasts, and go to finance-related related events.

I now read The Edge and The Star Bizweek almost every week – previously before I left Malaysia I also read financial news but not to this degree. At that time, I also didn't understand many things, and was just not that motivated to really understand those either. There are also ginormous amount of reading materials out there on the stock market or personal finance in general. Most are US-based, with some contents came from Malaysia: nevertheless, the lessons are similar. I've also start to read a lot of finance and wealth books. I now identify myself as a long-term, value and growth investor during these couple of months of awakening (Yeah, probably the Buffet and Lynch factor). I saved the receipts of all of these reading material purchases, so I can file them in my tax return.

I typically spend almost 1 hour for commute to work, and use this time to listen to podcasts – 60% it's money or finance-related podcasts (The Dave Ramsey Show, Stacking Benjamins, and The Money Tree), and the rest are on technology (TechStuff) and other things. Sometimes I got excited for the ride because I'd be in the traffic and listening to these podcasts. Freak! Probably I'll write about those finance podcasts in my posts later.

I attended finance-related events, for example Securities Commission's InvestSmart, Permodalan Nasional Berhad's Seminar Pelaburan, and Zayed Zulkifli's Kelas Saham 101. Learned heck a lot and got some gifts, too.

To-date, my understanding of the financial market has improved significantly over a mere one year. Before, I didn't even know how the stock or bond markets work. I didn't even know what the rule of 72 was. Yes, I was that ignorant. I've also now invested more either directly in the stock market, or through equity-heavy Amanah Saham Nasionals (ASNs). In 2019, I will invest more into these asset class to take advantage of my longer runway for potentially higher return.

Additionally, I've diversified away my holdings from EPF into mutual funds managed by two investment houses. Unfortunately, the two Unit Trust Consultants (UTC) that managed my investments varied in terms of their professional behavior. One UTC who is around his late 20s doesn't seem to care whether I understand my investments. I'm not even sure if he understands the fund portfolio that I subscribe to better than I do. Other than to text me every couple of months asking me for the allowed EPF withdrawal, he doesn't really give a shit.

The other UTC is more senior, aged about 50. Met him at one of the finance-related event, where he first laid out my potential retirement plan. We then followed-up with more meetings to discuss investment strategies, where we diversify my holdings into several equity funds, one REIT fund and one bond fund. The idea is to buy low into the equity funds, and wait for enough high before moving the gains (by switching funds) into the bond fund. The REIT will serve as a rather constant performer. I've also invested into the Private Retirement Scheme through the same fund house – might as well for tax-break purposes.

Finally, I now handle pretty much the finance of my family's home. It feels awesome to help your family to pay the maintenance bills for the house you were born and grew up in. I'm also helping my Mum with her finance matters more now.

Failings

I've chosen a rather questionable UTC (the young UTC). Rushed a bit too much into the decision. While the fund that I've invested into is no doubt a good-performing one, I don't like to deal with people that are tricky to handle. Other than ignoring his pestering me for investing more through him, I'm not quite sure yet what to do next.

Additionally, I lost some money during the few first months in the stock market. Made a couple of bad trades – usually because I caved in to my psychology and invested in non-ideal counters. Apparently this is what other people in other blogs talked about, that you initially have to deal with your self as your worst enemy. Gglad that I didn't lose that much money in the process, while I have better control of my head (or at least that's what I'd like to think) as well as gain more knowledge in the process.

So, if you've never invested directly in the stock market before, carve a hard fence around your "stock-playing" money from your other money. If you really want to invest directly in individual stocks. Only invest a set amount of money initially, to guard yourself from creating your own financial ruin. Otherwise, there's always mutual funds. A friend of mine also said that he knew somebody who went through divorce because of the carelessness of one of the marriage partner.

We're all financially imperfect. It's important to forgive ourself, let go of the disappointment and anger with yourself (or towards others to a certain degree, and try to recoup the losses of course). It helps us move forward. At the same time, better to reduce the chance of mistakes as low as possible.

Enriching my Connections

In as much as I want to do everything alone (I'm rather stubborn personality-wise), I know that I don't know most things and can't do everything myself. It serves you well if you realize that you are not alone, and there are others that are also going, or have gone, through a similar journey.

I now have my CFP friend, a rather knowledgable UTC, and several other people that either has helped or together on our respective growth journey of finance. One friend in particular need to take probably 50% of all the credits since we've been communication often, even when I was abroad, and have introduced me into the finance world.

There will be fraudster along the way, as I have experienced. I've been conned (not in 2018), too, by someone that I thought I could trust. I bet many of us can relate. I don't yet know how to defend myself from such possibility since the last time – was duped by a longtime friend who I thought I knew. Perhaps staying diversified will help. I honestly don't know.

Fears and Goals

Fears are usually linked closely to the things we want to accomplish. Biggest fears holding me from moving forward are the fear of 1) losing the gains that I've made so far, and 2) not understanding enough about the finance product. As I've previously alluded, I have quite a significant amount in cash. Need to pare that down and increase my holding into the equities. Equities are rather volatile currently, and fear is widespread. The near-perfect time to enter the market and buy at wholesale price. The perfect time to enter the market meanwhile is during a crash, and we can't predict that. If that ever happens, I'll buy even more.

When people are fearful, let's go for shopping.

I will first move a significant amount of that cash for a big goals that might happen in 1-2 years, perhaps move it into bond or money market fund. I will invest the rest into equities, diversifying in Malaysia and abroad. For Malaysia it's rather easy as I understand the market better and rather confident enough to invest into some individual stocks. For abroad, I prefer through mutual funds as I don't have time for research and monitor the investment. My fear here is not choosing the right fund, thus I need to do my own due diligence.

Conclusions

I've been out of college (from my first degree – I've only completed my advanced degree in 2017) for slightly more than 10 years now. I can't help to think about what could've happened had I invested more aggressively from the very beginning. But then again, at least I've been a hard saver myself, and have regularly saved into Tabung Haji and ASB, and with zero debt, so my situation could've gone a lot worse.
But then again, looking back won't change anything. You gotta move forward!

2018 has been a year filled with financial victories. I have more financial knowledge now, and I will continue learning. My strongest traits are that I'm constantly curious, diligent, and disciplined. Probably my upbringing and living in a German-speaking country have quite a lot to do with this ha ha.

I wish for a prosperous 2019 with more financial wins.


This post was inspired by another post from Market Watch. As always, please do your own due diligence before investing.