HOW TO MAKE MONEY in 2009
How to make money in 2009
By Lorna Tan and Michelle Tay
What a roller-coaster ride the year 2008 has been.
Stock markets have tanked, rallied, then tanked again. Home prices are dipping, the economy is shrinking, and wages have hit a plateau.null
And let's not even talk about the people who have lost millions and millions in Lehman Brothers- linked structured products.
While the peaks have been few and far between, the troughs have left people scrambling to find the bottom - and everybody is tightening their (seat)belts and hanging on for dear life.
Yet, despite the projected gloom in 2009, the new year represents a new start for many.
If you still have the funds to invest, should you buy stocks, a car or a house?
What lessons have financial experts learnt that you can also glean wisdom from?
Invest brings you the best investment advice from 10 savvy investors.
Mr Jim Rogers, Singapore-based American investor, author of A Bull In China: Investing Profitably In The World's Greatest Market, and creator of the Rogers International Commodities Index
What was the best and worst thing that happened to you financially this year?
Best: Being short on Fannie Mae and the United States investment banks. These stocks collapsed, some by 100 per cent, so I made huge percentage gains on them in 2008.
Worst: Being long on anything at all.
How do you see 2009 panning out?
Most economies and financial markets will get worse as the year progresses.
We are in a historic period of forced liquidation which has happened only eight or nine times in the past 100 to 150 years. There is a forced reversal of positions with no regard to the fundamentals. One makes money in times like this by finding things with unimpaired fundamentals because they will become market leaders.
The only thing I know with unimpaired fundamentals are raw materials and commodities. In fact, their fundamentals are enhanced. Reserves and inventories of everything are declining while governments worldwide are printing huge amounts of money, which has always led to higher prices down the road.
So commodities are the best place to be.
Some parts of the Chinese economy will do well too.
What is one piece of financial advice you would give a person looking ahead in 2009?
Learn about real assets, raw materials and commodities as the fundamentals are improving there, while the fundamentals are deteriorating in most other sectors.
Would your answer be different for a) a single, working person; b) a married couple with school-going children; and c) a retiree?
No.
Is it a good time to buy a car or property?
I am not buying either.
One can get great deals on cars now so I guess it is a good time to buy a car, if one really needs one. Otherwise, I would wait. My view is that property will still be declining in much of the world for at least another year or two. There will be some special places in the world where property will be okay, but they will be few.
Mr Ben Fok, chief executive of Grandtag Financial Consultancy
What was the best and worst thing that happened to you financially this year?
Best: My equity portfolio was down by only less than 15 per cent. I had lightened the majority of my stock portfolio in September when the Fed was taking over Fannie Mae and Freddie Mac. I sold part of my equity portfolio bit by bit as the bad news was revealed one by one. Now I am very light in equities and heavy in cash. I also did not invest in, or advise my clients to invest in, any structured products.
Worst: I totally forgot about my Supplementary Retirement Scheme (SRS) account. I did nothing to it and it was down by at least 40 per cent.
How do you see 2009 panning out?
It will be an uneventful year for the financial markets. There will be bad news as the world slips deeper into recession and then tries to recover from it. Some people are calling a market bottom but I think, at best, the stock market will be in a tight trading range until there is strong evidence from macroeconomic indicators that growth is beginning to stabilise. But that does not mean ignoring the market at all. On the contrary, I believe it is time to take calculated risks as equities tend to react ahead of an improvement in the economy.
What is one piece of financial advice you would give a person looking ahead in 2009?
Proceed with caution when entering the stock market. While many stocks are heavily sold down and are looking very attractive, the world macroeconomic picture is not that bright.
Therefore, attractive valuations of certain stock markets must be weighed against the risks stemming from a global recession that will trigger a cyclical contraction in corporate earnings.
The world economy will take at least a year to recover from this financial shock and we cannot rule out further corrections in the coming months. Invest with what you can afford to lose and remember the stock market has no human emotions.
To protect yourself from downside risk, look to invest in undervalued stocks or stocks that are selling below net asset value. Look also at sectors with stable earnings.
Would your answer be different for a) a single, working person; b) a married couple with school-going children; and c) a retiree?
a) Now is the best time to stock-pick. Usually, this group of people has fewer liabilities and a longer time horizon to hold on to fundamentally sound stocks. The recommended asset allocation is 100 per cent equities.
b) Invest in the stock market, with some exposure in bonds. Currently, corporate bonds are attractive despite rising default rates. The recommended asset allocation is 60 to 70 per cent in equities and 30 to 40 per cent in bonds.
c) As they need to create an income stream and have a shorter time horizon, investing in bonds is the best asset class and the least volatile. However, a small exposure to stocks is also recommended. I would recommend 20 to 30 per cent equities and 70 to 80 per cent bonds.
Given the financial situation, is it a good time to buy a car or property?
Certificate of entitlement (COE) prices are down substantially...and interest rates are at rock-bottom prices. However, bear in mind that a car is a depreciating asset and the benefits of convenience also come with price tags. So before you buy that car, ask yourself if you really need one.
If you are looking for a home or even an investment property, now is the best time to shop around and you may get it at bargain prices from a fire sale. Again, before you do that, review your financial situation, make sure you can afford the monthly instalments and remember that this is a big ticket item. Buying a car and a property requires a loan which adds to your financial burden.
