As I’m writing this, the Malaysian Ringgit is trading at a pretty low level:\u00a01 USD = 4.46 MYR<\/p>\n
It seems to be sliding lower and lower every\u00a0week. And it’s getting worryingly close to its historical low: January 1998; 1 USD = 4.885 MYR.<\/p>\n
If you can’t (or too young to) remember, that was back in the days\u00a0of the Asian Financial Crisis.\u00a0Malaysia and many of our Asian neighbours lost a lot of money (and confidence). South Korea, Indonesia and Thailand\u00a0had to borrow money\u00a0from the International Monetary Fund (IMF). Malaysia imposed strict capital controls, and fixed the exchange rate at 1 USD = 3.80 MYR for a couple of years.<\/p>\n
The good news is that we have\u00a0recovered from that bout of ringgit tumble.<\/p>\n
The bad news is that the ringgit is in for another decline. And while we probably can’t do too much about it now, here are some ideas on what you\u00a0can<\/em>\u00a0do to preserve the value of your money.<\/p>\n On paper, it looks like we’re doing terrible. The ringgit dropped more than 6%alone in November 2016.<\/p>\n If you travel overseas a lot and use a lot of branded, imported stuff —\u00a0I’m sorry for your pain.<\/p>\n Domestically though — it’s a\u00a0less direct link between\u00a0the falling ringgit and a painful life. For example, if you’re doing all your spending locally, on local products and buying from local producers — you\u00a0won’t feel the impact of currency drops immediately. The RM10,000\u00a0you have in the bank is still RM10,000 — as long as it’s used within Malaysian borders.<\/p>\n If you’re still worried about your ringgit losing value though, you could consider holding less money in the bank, and investing\u00a0more in good local assets.<\/p>\n Cash\u00a0is always going to be\u00a0affected by currency fluctuations and inflation. RM3,000 might have bought you a nice Coach handbag from Suria KLCC in 2015, but you might need RM3,300 in 2017.<\/p>\n But say, you buy an apartment to stay in.\u00a0It’s a hard asset — it’s still your home regardless of currency fluctuations. You can still sleep\u00a0in it at night.<\/p>\n (Unless things get catastrophically bad and there are hungry rioters trying to break into your apartment. But in that case, we’re all in serious trouble anyway.)<\/p>\n High property costs scaring you off? You can start by investing in\u00a0Real Estate Investment Trusts<\/a>\u00a0(REITs) instead — where you get the benefits of investing in properties — but need less money to start.<\/p>\n This probably doesn’t make\u00a0sense right now, as the ringgit is trading near its historic low. (But you can use this point to protect yourself from currency fluctuations the next time 1 USD = 3.2 MYR.)<\/p>\n Unless, of course, you think the ringgit is\u00a0going to drop even\u00a0lower.<\/p>\n Say you own an asset that is priced in US dollars. When the USD strengthens against the MYR, your USD-priced asset is also now worth more in ringgit. So technically, you’ve made a profit.<\/p>\n What are some USD-denominated assets people can buy?<\/p>\n This applies to other currencies as well. For example, if you believe that the Euro or SGD holds its value better than the USD — you can invest in assets which are priced in those currencies.<\/p>\n So far we’ve been talking about defensive strategies. So here’s an offensive one:\u00a0take advantage of the exchange rate and start making money in international\u00a0dollars.<\/p>\n It’s not as difficult as it sounds.<\/p>\n Most of us are very\u00a0familiar with the Internet, online banking and the\u00a0freelance “gig” economy<\/a>.<\/p>\n What are some valuable\u00a0skills you\u00a0already<\/em>\u00a0have that you could offer online? Even better — which skills could you sell internationally to earn US dollars?<\/p>\n Here are some examples: accounting, bookkeeping, graphic designing, Photoshop editing, digital marketing, proofreading, writing, blogging, video editing, animation, programming, website designing, admin support, and\u00a0business consulting.<\/p>\n If you do not have an existing network of clients, you can always register and offer your services on websites like\u00a0Upwork.com<\/a>\u00a0or\u00a0Freelancer.com<\/a>. However, these websites do charge a commission for every job you take up.<\/p>\n A couple of my Malaysian friends already do this for a living.\u00a0One of my friends who does freelance writing even made five figures last month. The “weak” exchange rate helped.<\/p>\n If you’ve been well prepared, this one’s for you.<\/p>\n Yes, I’m just as upset as the general population that the economy is doing badly, and the ringgit is depreciating. But if you have reserves, this might actually be the “perfect” opportunity for you.<\/p>\n The theory goes like this: Assuming things continue to go bad, Malaysia might end up in a recession. Like back in 1997, if\u00a0the stock market crashes, assets would lose value, and a lot of people would lose money.<\/p>\n It’s not a fun time and I really hope it doesn’t happen. If it does however, markets tend to overreact. So that expensive Nestle or Dutch Lady\u00a0stock you’ve been eyeing\u00a0might actually become cheaper. A lot cheaper. You might be able to pick up other assets like property at a discount too — because a lot of people would be wanting to sell.<\/p>\n Of course, all the above is speculation. No one\u00a0— not even famed Wall Street analysts — predicts things correctly all the time.<\/p>\n But\u00a0if you have sufficient cash reserves, and the country goes through a recession — it might be time to bring that cash out and get\u00a0some valuable assets for cheap. Plus, it never hurts to have reserves.<\/p>\n – – –<\/p>\n I hate to be all doom and gloom, but it looks like we’re\u00a0going to\u00a0be in rough times for a while.<\/p>\n However I also believe that behind every challenge lies opportunity. While we continue to be alarmed at the painful slide of the ringgit, we can also do things to prepare ourselves for tough times ahead. Maybe it just needs some creative thinking and willingness to change.<\/p>\n As someone wise once said, “You can’t control everything that happens to you, but you can always control the way you respond.”<\/p>\n<\/span>1. Park your money in \u201csafe\u201d local assets<\/strong><\/span><\/h2>\n
<\/span>2. Park your money in USD-priced assets<\/strong><\/span><\/h2>\n
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<\/span>3. Make money in USD<\/strong><\/span><\/h2>\n
<\/span>4. If things crash \u2013 buy low<\/strong><\/span><\/h2>\n