Do your planning to prevent rising prices from eating into your investments

Do your planning to prevent rising prices from eating into your investments

As 2014 rolls in, Malaysians are bracing up to face a slew of hikes from electricity tariffs to assessment fees, toll charges and public transportation fares.

The latest Consumer Price Index (CPI) measuring the average price of a basket of consumer goods and services released by the Department of Statistics Malaysia indicate an increase. Compared with the same month in 2012, the CPI for November 2013 registered an increase of 2.9%, and when compared with the previous month, the CPI increased by 0.3%.*

Going forward, the prices of goods and services seem likely to rise further on the back of a power tariff hike starting 1 January 2014. RHB Research estimates the inflation rate will be further increased 3.0%-3.4% in 2014**. With this, purchasing power shrinks simultaneously. A much more troubling concern would be the erosion of one’s savings and even investments because of rising prices.

To prevent your investments from eroding, do formulate your investment plan now. Take a cue from Benjamin Franklin who advised, “If you fail to plan, you are planning to fail.”

Consider some of these points in coming up with an investment plan:

  1. Be clear about your current financial situation;
  2. Determine your goals and initial investments;
  3. Understand risk and consider your comfort level in risk-taking;
  4. Plan for short-, medium-, and long-term goals;
  5. Implement your plan and follow-up your investment with regular monitor.

With your investment plan in hand, consider your investment returns – it should be higher than the official inflation rate. Here are some suggestions:

  1. Look for stocks that have persistent and high dividend yield, or at least beat the inflation rate;
  2. Look for potential growth stocks which may see profits increase substantially over the medium- or long-term period; and/or
  3. If the market trend is not in your favour, why not cut loss and look for others for better opportunities.

Reference:

* http://www.statistics.gov.my/portal/index.php?option=com_content&view=article&id=2194&lang=en retrieved on 26 December 2013

**RHB Research titled “Inflation Rose To 2.9% Y-o-Y, But BNM Likely To Maintain Key Policy Rate For Now” on 18 December 2013.