Time really flies, it has been two years since COVID-19 hit. One year ago, many including myself, expected this pandemic to come to an end in 2021 and our economy would gradually recover. However things never go as planned. From new COVID variants, politic crisis, announcement of “prosperity tax” to nationwide flood, stock market and economy in 2021 was a roller coaster ride. According to WHO, unfair vaccine allocation will prolong this pandemic. Omicron would not be the last variant. New variant would continue to develop, especially in countries where vaccination rate is low. Once it happens, it is impossible to stop spreading of new variant to other countries. When wealthy countries use booster dose to tackle the situation, it worsens the unfair vaccine allocation problem across the globe. Therefore I’m skeptical if this pandemic will finally end in 2022. Nevertheless, with much better vaccination rate in Malaysia compared to one year ago, I believe Malaysia will do better in 2022. The biggest risk to the economy in 2022 is probably politics rather than COVID, in my opinion.
For my personal financial situation, saving rate, net asset growth and passive income meet targets I set one year ago. In fact, the figures are so close to my targets so I was surprised. The ultimate target to have RM100,000 passive income annually by age of 40 remains unchanged. Progress made in 2021 was not lagging behind, but not much ahead as well. Considering economy in Malaysia did not recover well in 2021, I feel satisfactory to the progress that I’ve made. For the upcoming 2022, due to the prosperity tax introduced, I expect dividend could be impacted. Therefore I made a rather conservative passive income target for this year, but not off the track to our my utimate goal.
The other financial decision I’ve made, is getting a new car this year, to replace my 15 years old myvi. It is probably not common for people around my age to use the same old car for so long. Looking back now, I would still keep my decision of not changing car if I was given a second chance. I have not made big capital expenditure for years, it hurts to fork out the money. Having say that, due to the decision to postpone my car purchase, the gain I have from stock market and dividend that I would receive, is more than enough to pay for the car. At least, this is how in convince myself to go with a new car 😛
I decided to pay more down payment for new car, I still don’t like the feel of owing money. So my saving and available capital to invest would definitely be impacted this year. Also my expenses this year are expected to be higher, due to gradual transit of working from home back to office, and plan to have some travel trips. Hope Malaysia’s stock market and companies that I invest in would performance well in 2022 to make up for it.
For my son, all his savings remain in stock market. I topped up for him during Chinese new year and his birthday as his present, and I intend to do the same this year. It is not a lot of money, but I hope this demonstrates to him some day what compound interest can do and he could know how to manage his own finance earlier.
Hi CK, Happy New Year! Good to know that you were doing well in 2021.
Our investment styles are similar. Over the years I’ve also become more convinced on the merits of patient value investing approach. However I only apply this approach to my local stocks, which is only part of my equity allocation. I also own several low cost foreign. I rebalance/ add/ reduce those ETFs based on the principle of mean reversion of market valuation.
Like you I’ve become apprehensive of the Malaysian politics. While greater openness and competition in politics will be healthy for the long term, it has also led to populism and short sighted policy making. As the pandemic lingers on, the government fiscal position will remain weak. The emolument of the 1.6 million civil servants and rising pension liabilities takes up almost half of government revenue. Debt servicing cost already takes up another 18%. Official government debt is projected to breached RM1 trillion this year. There is no political will to tackle the root causes. There could be a blow up in future, or government may squeeze easy targets like corporations. The one time Prosperity Tax, while necessary, may happen again when necessary. The now postponed taxation on foreign source income shows the desperation and potential damage. Money needs to be taken from somewhere/ someone to help the hundreds of thousands if not millions who have depleted their EPF savings, with politicians clamoring for more withdrawals.
Therefore going forward I will pay more attention to macro level risk. I believe diversification across asset classes and also out of Malaysia is important.
Hello James
Yes I agree with you. Have been thinking to venture into foreign markets. It’s very new to me so need time to understand more