Tuesday, October 18, 2016

What Should You Do To Survive The Falling Ringgit?




According to Bloomberg last month, Malaysia’s Ringgit has posted its biggest slump in 10 months due to the lower crude oil prices and the fallout from a controversy involving a state investment firm which sapped demand for the nation’s assets.

From the projected outlook by analysts and market experts, it is very likely that the Ringgit’s performance be volatile, weighed by commodities price particularly oil prices, political uncertainties and also gloomy global economic conditions.

Taking charge of this, here are some of the proposed moves you can take to protect your assets or investments:

1.       Open A Foreign Currency Savings Account

Whether you are looking for an investment opportunity, to pay for your child’s education overseas or an international business venture, this is the evident way to own foreign currencies. It is available in various currencies such as:  USD, AUD, SGD, GBP and RMB in many local and foreign banks throughout Malaysia.

However, the interest rate rewarded for putting your money into these savings accounts is minimal, and some are even close to 0%. This is due to the overall low interest rate policies in their homelands.


2.       Invest In Retail Bonds

If you have higher risk appetite, you may go for the retail bonds that are offered by some foreign banks in Malaysia. These retail bonds are denominated in foreign currencies such as USD, SGD and AUD.

They are classified according to their credit rating; companies that are financially sound will earn higher credit ratings. Hence, investors may choose according to their risk preferences, tenure and their expected rate of returns accordingly.

1.       Invest In Unit Trusts, Stocks And Properties With Lower Volatility

More sophisticated investors may consider unit trusts, stocks and properties in foreign countries. These investments are for medium term to long term investors who has a longer holding power. In addition, you also need to do a lot of homework for your investment as the foreign markets are more volatile.

All investment involves risk, especially the foreign currency markets. We must understand that there is no one currency that is more superior to others forever. All currencies have their ups and downs that are reflected on their country’s financial strength and its political stability.

Although the Ringgit is currently in a depressed state, recovery may be just around the corner. Hence, unless you have an overseas business or children studying overseas, do not allocate more than 20% of your portfolio into foreign currency assets as foreign currency involves high risk, considering the current global economic situation from Brexit and geopolitical factors.

And also, it is important to know that most of the stocks that are benefitting from weaker ringgit or stronger US dollar are already trading at its fair value or even overvalued. So, you consider taking a look at more stable options such as dividend-stocks and REITs to secure your capital.

This article is contributed by CompareHero.my, Malaysia’s trusted financial comparison portal dedicated to saving you time and money by comparing all credit cards, broadband plans and personal loans in Malaysia.

TEH

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