I can’t believe that it has only been a year since I went on my pre-Covid-19 Christmas holiday with one of my two sons. The pre-pandemic world seems like a lifetime ago. So much has changed and then again, so many things remain the same. On the one hand, Covid-19 and lockdown made me appreciate many things that I took for granted – cleaner air and clearer skies, cleaner beaches, cleaner rivers and seas, the re-emergence of our precious wildlife, the precious time we spend with our loved ones (it will have been a whole year before I see my two boys again), and the value of good friends. On the other hand, the realities of life continued in 2020 – pandemic or no pandemic: in my case, to keep building HelloGold; to save money for my children’s education; and to put enough aside for my eventual retirement. 

With the realities of life looming large, how was 2020 from a financial savings perspective? Gold had a great 2020. It started the year below RM200 per gram and it is now around RM240 per gram. That is a 20% increase in value. In contrast, the KLCI has risen by 6%. Even so, I am sure there will be some who are disappointed with gold’s performance in the last quarter of 2020 especially after gold nearly hit RM280 per gram in August. I get it – who doesn’t want to make more money and faster?

How difficult is it to make 20% in one year? For most Malaysian fund managers – the professionals who invest for a living – it is pretty difficult. Out of the 1,300+ Malaysian funds that Morningstar tracks, only 303 funds made more than 20% in the last 12 months. That number drops to just 6 funds over 3 years. And NONE beyond 5 years (just for comparison, in the US, only 66 mutual funds consistently delivered an average annual return of 20% or more out of a total of more than 15,000 different funds over the last 10 years). Delivering 20% in one year is tough and delivering 20% year in year out is even tougher – you can’t plan on your investment professionals consistently delivering this kind of result.

Of course, there are other ways to get a 20% return. For example, if you have the financial acumen and the time, you can stock pick like some of my more financially savvy friends do and you will no doubt make far more than 20% per annum. But you need to have both the time to research and a deep understanding of financial analysis. For the rest of us, we are not fortunate enough to have the time and the know-how; and frankly, our hands are full juggling our careers and our families.

So what is a good return for the rest of us? I think that the long run EPF average of 6% is one good measure. After all, many of us contribute to EPF. It probably makes up our largest single investment vehicle. So anything that matches or beats 6% is probably going to help us with our long term financial goals. At 6%, less than 120 funds deliver that performance every year for the last 10 years (this isn’t because Malaysian funds are bad – 1) over the last 10 years, the KLCI has only grown by 4% per annum 2) in the US where the S&P500 has, on average, grown by 13+% for the last 10 years, less than 50% of mutual funds have delivered 6% or more on average over the last 10 years). And gold? It has delivered 6.3% on average over the last 10 years. And its average returns are even better over 15 years, 20 years and 25 years.

I should go on for another 20 pages about what 2020 has meant from a financial perspective because a short blog is no substitute for proper, thorough in-depth analysis. But I won’t because this is a blog post.

So if you want to find out more about what the markets did in 2020 and why; and if you are lucky enough to have a great financial advisor, then speak to your financial advisor and make sure he gives you the complete rundown so that he can help you plan your investment strategy for 2021.

And if you want to know what I told my two boys this year as they started on their adult lives, this is it – it is simple:

• • • Invest as much as possible – ideally 15% of whatever money comes into the bank account from their salary (and if they have additional cash after the 15% is invested, save the rest for a rainy day fund)

• • • For my two boys who aren’t very financially savvy, I have suggested this allocation:
      • 60% in fund managers with a good long term track record and institutions like EPF, PNB, Tabung Haji. While the latter has generally delivered consistent returns, their portfolios are overwhelmingly Malaysian stocks which needs to be balanced with non-Malaysian investments
      • 20% with robo-advisors that will give them access to markets outside Malaysia and will allow them to have a more diversified portfolio
      • 15% in gold. This will give them the ‘insurance’ protection for their investments for times when the Malaysian/global economy weakens
      • 5% in bitcoin. This will give them access to an investment that can potentially increase beyond their wildest dreams.
  • • It’s a long term savings plan so focus on the long term. And don’t act like a trader looking at the performance every day, or even every week. If absolutely necessary, check every 6 months.

As the year that was 2020 draws to a close, this world of ours has shown that there are things that are so much more important to us, our children, and our loved ones than maximising the return on our money: good health, time to spend with those who matter most to us, the environment around us. So I hope you can take some time off from the realities of life to spend with those closest and dearest to you as the year end approaches and I hope that 2021 gives you and all those around you all that you wish for.