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2015 Looking ahead to 2016

Wealth planning is key to facing the fiscal year ahead


As we bid adieu to another year and welcome in 2016, perhaps it’s timely to take a look what the year ahead may bring us. The New Year is a time when many of us make resolutions to change our lifestyles to lead healthier and more productive lives, and it is also a great time to take stock of our finances and plan our financial goals for the year ahead as well.


So what does 2016 hold for you?


Potential storm clouds ahead

On the global economic front, the International Monetary Fund (IMF) warns of increasing risks to medium-term growth as the global economy still continues to be weighed down by the 2008 financial crisis.1 In its latest forecast, IMF expects the world economy to grow by 3.6% in 2016, below the 3.8% expansion that was previously forecast.1


“Six years after the world economy emerged from its broadest and deepest post-war recession, the holy grail of robust and synchronised global expansion remains elusive,” says Maurice Obstfeld, the IMF’s chief economist.1


According to Obstfeld, the new forecast marks down expected near-term growth marginally but nearly across the board and downside risks to the world economy appear more pronounced than they did in the first half of 2015.1


Back home, Moody’s sees Malaysia’s gross domestic product (GDP) growth weakening to 4.5% in 2016 compared to the 4.8% GDP growth projected for this year.2 In its report on the Asia-Pacific region in September 2015, Moody’s said weakening sentiment was cooling private sector consumption and investment, compounding soft external demand conditions.2


Planning makes perfect

Amidst continuing uncertainty with the economy, perhaps you should consider developing a good wealth plan. If you have a strong wealth plan in place, then you can ride out both head winds and tail winds, and be able to achieve your financial goals.


As a starting point, you should review both the short and long-term financial goals you have set for yourself.3 Were you trying to increase your savings for a down payment on a home? Perhaps you wanted to invest more money towards your retirement? Did you accomplish those goals? If the answer is yes, do you want to set new financial goals to achieve in 2016?


During 2015, have your personal and financial circumstances changed? Did you have a child, get a job that requires you to migrate or perhaps started a new business venture? If so, would any of these changes demand a reprioritisation of your financial goals?


Once you have a clear picture of your personal and financial journey in the year ahead, then you will be able to put a wealth plan in place to reach your goals and dreams.


Planning for your future

Undeniably, retirement planning comes to the forefront when the discussion of wealth planning arises. Is your investment mix and portfolio still on target to allow you to retire when you want to and continue to lead the lifestyle that you are accustomed to?


It is important to review your investment portfolio to ensure that it is still on target to help you achieve your financial goals in the year ahead.3 This is particularly important when there is uncertainty in the economy which can cause volatility in the markets.


To determine whether your investments will help you reach your financial goals, these are some questions you should ask yourself:3


  • Do I still have the same time horizon for investing as I did last year?
  • Has my tolerance for risk changed?
  • Do I have an increased need for liquidity?
  • Does any investment now represent too large (or too small) a part of my portfolio?


For longer-term financial goals like retirement, it may make sense to take some investment risk to gain higher returns. This is to help offset your purchasing power being reduced by inflation.4 Having 20% of your investments in stocks can give you enough growth to at least keep pace with inflation but the exact percentage depends on your comfort with risk.4


It is important to make regular financial reviews integral to wealth planning for your retirement.

Planning for your kid’s education

Did you become a parent recently or will become one in 2016? Then it’s never too early to start planning to save for your child’s education. You want your child to have the best education possible but rising school and university fees can be costly. Education costs are usually a long-term goal that can easily take more than five years to achieve.5


According to HSBC Malaysia Retail Banking and Wealth Management Head Lim Eng Seong, the key to ensuring you can afford to fund your child’s education is to plan and save.6 He says parents should start saving early, from the time their children are very young in order to generate additional savings through compound interest.6


To help finance your child’s education, you could put your savings into stocks, mutual funds, fixed deposits, bonds and education policies.5 Each offers different benefits and rates of return, and what you choose will depend on your risk appetite and time frame for when you will require the funds.

Planning for a migration

Is 2016 the year you are planning to seek out new adventures in a new country? If you are planning on migration and have a need for foreign currency, perhaps it is timely to consider how you can accumulate the foreign currency you need at the exchange rate that is best for you, particularly now when the Ringgit is experiencing foreign exchange volatility.


There are various foreign exchange solutions you could consider including foreign currency investments like currency-linked structured investments and dual currency investment, as well as foreign currency savings and fixed deposit accounts.


Whatever solution you choose, one strategy to use is foreign currency accumulation. By accumulating the foreign currency you need over a period of time or timing your foreign currency buys by monitoring the market and buying when the price is favourable, you can potentially enjoy a lower average buying price over time.


The foreign currency accumulation strategy can help you potentially offset the risk of any adverse price movements due to foreign exchange volatility.


Planning for a career break

Have you been longing to take time out from work to do something different? Perhaps to travel the world for six months? Or wanting a change in career?


While a career break may seem like what the doctor ordered, it can be expensive and finances may well be the biggest obstacle to following through with your plans. However, with some careful wealth planning, you could make your career break a reality.


A few key financial considerations are:


  • Do I have enough savings to cover the unexpected?
  • How do I manage my debt commitments like a mortgage?
  • How can I ensure my financial future will be secure?


To build enough savings to cover your expenses as well as the unexpected during your career break, you could consider short-term investments like savings or fixed deposits.


If you have large outstanding debts like a mortgage or expensive credit card debts, see if you can restructure the debts so they are more manageable. Or check with your lender to see if they will allow you to defer payments or utilise a payment holiday. Just make sure you remember to restart your payments once you are earning again.8


While a career break can be exciting and rewarding, you have to make sure it doesn’t negatively impact your future financial wellbeing. It is important to do your research and make sure that you protect your long-term financial future.8 For example, you need to ensure that you continue to service any insurance policies so they do not lapse and you don’t fall behind on your wealth planning for retirement.


Wherever your life’s journey may take you in 2016, the key is to be financially prepared. Speak to your Relationship Manager today to find out how we can help you achieve your financial goals in the year ahead.


1 The Telegraph, Storm Clouds Gather Over Global Economy as World Struggles to Shake Off Crisis, 6 October 2015.
2 The Malaysian Insider, Malaysia’s GDP Growth to Weaken to 4.5% in 2016, says Moody’s, 8 September 2015.
3, Healthy Personal Finance Resolutions for the New Year, undated.
4, 7 Steps to Achieve Your Financial New Year’s Resolutions, 2 January 2015.
5 Australian Securities and Investments Commission, Saving for Your Children’s Education, undated.
6 The Star Online, Parents Prefer Overseas Education, 26 July 2015.
7 Life Insurance Association of Malaysia, Think About Income Protection Too, undated.
8, Planning Financing for Your Career Break, 27 November 2007.