By Felicia Lim
Having trouble coping with your investment losses? Learn about these steps you can take before starting again.
There are different types of investment vehicles or assets classes that we can have to grow our net worth. We can utilize them to achieve different life goals. Common types of investment vehicles are property, stocks, unit trust, and saving plans; with many more available for an investor to explore.
While everyone would certainly want to reap profits all the time, the reality is that setbacks do occur.
If you are nursing an investment that is not doing well, or have recently exited from one, and are uncertain about how to proceed, this article has tips for you.
#1. Take a Break
You need to take a break and take a few steps back. Often, people rush about with their busy lives and just continue to pay the cost even if it’s expensive because they don’t feel it.
Think of it as a bleeding wound. Do you just wipe away the blood and go on rushing about, or do you take a moment to analyze what caused the wound and what are the best steps to treat it? Or would you be okay if it turns into an avoidable infection and affects your quality of life.
The same goes for any investment choices that aren’t working out as it could impact your overall financial situation. Hence, gives yourself some space to clear your mind, before you review and make new plans.
#2. Revisit the Life Goals of the Investment
Take another look at the purpose of the said investment. Or perhaps the life goals to which this investment belongs. Typically, the most common life goals are wedding funding, children’s education fund, haj planning, retirement funding, and many more which depend on your desires.
It is vital to be aware of the purpose so you can have a clear view of its exit plan – when it needs to be sold off to achieve your goals. The time frame is critical as it determines your short-term and long-term strategy as in to hold, sell, or switch, when possible.
#3. View the Failing Investment Against Overall Asset Allocation
Do list down all your assets and put in the holding of each asset. Calculate the holding percentage of each asset against the total asset, setting the total assets as 100%.
Quite often people asses their investment holdings by number instead of by percentage. Both are true hard facts, but they can give you different viewpoints. For example, RM50,000 could be 8% or it could be 50% of your overall asset allocation. This is significant since those holding 8% will be more relaxed and feel any decisions will have a smaller impact on their lives compared with those holding 50%.
If you have not yet explored the percentage of your failing investment against your overall asset allocation, do it now.
#4. Explore the Learning Points
List down what you did well, and what you want to continue to maintain moving forward. Examples of learning can be your understanding of your own risk appetite, your understanding of the legal process if for property investment, your gain in life experience, and many more.
In life, there are always things to learn. Sometimes we are too focused on what we lose and forgot about what we gain. You will gain some learning from each experience. A holistic learning experience would bring you joy and motivate you with more exposure to different things in life.
#5. Review What Went Wrong
List down what went wrong and how you can improve in the future. Some might feel exploring the root cause is painful and avoid doing it. Focus on how doing this will grow you, thereby shifting the focus to a positive (personal growth) rather than negative (dwell on mistakes).
The root cause can be either an internal or external factor. Internal factors could be either your own understanding of the investment features; or omission of life purpose tagged to that investment which commonly occurs, and other personal factors. External factors could be surrounding influence, following trends blindly without understanding further and aligned back to self, misleading information received, and others.
#6. Explore Possible Alternatives
List down the possible alternatives to explore which can reduce the financial impact or even enhance your current financial situation. Also, add in the financial impact on a short-term and long-term basis.
Doing this will enable you to have a clear holistic picture of the dos & don’ts together with the respective financial impact. By focusing on the data, you can reduce the emotional element & have more justifiable factors to consider as part of your financial decision-making process. The same method can be also adopted when you want to kick start a new investment plan in the future.
#7. Focus on What You Can Control
With all the above input, you are now able to make a wiser decision on what to do next. After all, action is the most important and critical step of any plan. Taking action means you can choose to take it or leave it instead of sitting on it and being affected emotionally due to it.
There are times when external factors that are out of your hands come into play. If that happens, just focus on what you can take control of at the current moment and move on. You might want to monitor or revisit from time to time as you chose to hold on to the investment. Make a decision and move with it.
#8. Consider Getting Professional Advice
Some people might feel a little overwhelmed by the above. Whether it leads to overthinking, or an inability to take action, it may be valuable to get a licensed professional’s opinion.
In Malaysia, financial planning is a regulated activity and a person needs to be licensed to give financial advice. You may check their licensing status on the Securities Commission website. Select one that you are comfortable talking with and let them be part of your financial planning journey.
Experiencing an unpleasant situation that brings you disappointment, sadness, or even fear is common in life. However, realizing it is an experience you can learn and grow from can motivate you to continue exploring the world of investing, especially since it’s essential to growing your money so you can achieve more in life.
Register your name here and get connected to a licensed financial planner for professional help.
About the Author, Felicia Lim
Felicia is a Licensed Financial Planner attached with Wealth Vantage Advisory. As an accounting graduate, her dual certification helps her serve multi-cultural clients better. With the technical skills & knowledge of various solutions on hand, Felicia can differentiate her role to the client. Besides that, Felicia communicates well with clients during the fact-finding process and diagnose their issues. Each proposal comes along with a comparison, justification & the relevant impact on the client’s financial goal. Her approach is always to act in the client’s interest first and it has been embedded in her diagnosis & solutions which is the root cause of the issue to be solved for the benefit of a client.