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4 Ways To Ride The Recession Wave

By Derek Gue

4 Ways To Ride The Recession Wave

Do you have two minutes to read this? Good. That’s all it takes to read this article to hopefully provoke some thoughts and consequently take appropriate actions to ready yourself in the ever changing economy to stay ahead of the pack in your profession and industry.

Preparation Is Key

An estimated 80% of current jobs will likely cease to exist in 10 years’ time. Are you prepared for this outcome? Are you currently relying on a single source of income (i.e. your job) and hoping it’ll be sufficient for the future?

In a recent Straits Times article,​ it was reported that over “500 professionals, managers and executives (PMEs) ­ of which 23 per cent were below 40 ­ sought help for employment and employability matters from the labour movement in the past year.” And Labor MP Mr Patrick Tay expects that PMEs retrenchment will become “more prevalent with the current turbulent economic situation.”

"With an ageing workforce, it is also worrying that PMEs above 40 years of age appear to be more susceptible to redundancies and unemployment," Mr Tay said.

It is therefore imperative that we second­skill ourselves and also create multiple streams of income that will help us tide over any financial tsunami. Think about creating businesses which can run on full automation (e.g. e­businesses) and look for passive income streams. If you need to hire freelancers to help in aspects you are not an expert in, you can visit sites such as fiverr.com, upwork.com and outbounders.com.

Don’t have your head in the sand, hoping that all will work out eventually. Preparation is key, and preparation has to start now. As Warren Buffett famously said, "Only when the tide goes out do you discover who's been swimming naked."

Keep Learning: Avoid Complacency At All Cost

I have clients who work as HR managers and headhunters and they have shared with me that employers are looking beyond each candidate’s job­related competencies. They are looking for people who can do more, and contribute in more than one way to the success of the Organization. Thus, we can no longer simply pay lip service to ‘upgrading’.

Singaporeans aged 25 years and above have received SkillsFuture credits of $500 each. The aim is to help us explore skills and programmes outside our current industry, but have you utilised the credit already?

Besides learning a new skill, get to know your course mates and make more friends.

There may be opportunities to work together in future. As a wise person once said, “your network determines your net worth”.

I like this particular quote from Mr Jack Ma, Founder and CEO of Alibaba Group: “If you want to win in the 21st​ century, you have to empower others, making sure other people are better than you are. Then you will be successful.” Remember this as you make new friends, expand your network, and cultivate mutually beneficial business relationships.

Keep An Eye Out For Opportunities

Understanding and investing only in traditional investment classes may not be enough prepare for a comfortable retirement. We may need to learn and consider:

i) New forms of investments: Other than equities, bonds and funds, consider newer forms of alternative investments such as bitcoin, venture capital, and more.  ii) New geographical locations of these investments: the Singapore market might already be too saturated with products and services. We may need to venture abroad to find greener investment pastures, especially if we are in our 20s and 30s.  iii) New ways to invest: Other than lump sum, regular investing and utilising leverage to invest, will there be newer modes of investment in the future? Crowdfunding has gained prominence in the past few years ­ will it be the new way to invest?

Do be cautious though, and conduct careful research on the suitability and risks before committing to any purchase and investment. Remember Warren Buffett’s Rule Number 1: Do not lose money. Research the background of the Company and check MAS’ list of registered and licensed financial institutions

(https://masnetsvc.mas.gov.sg/FID.html). Do not forget about the MAS investor alert list too, (http://www.mas.gov.sg/IAL.aspx?sc_p=A).​ While there are many opportunties, there are many scams as well. This website by the National Crime

Prevention Council, http://www.scamalert.sg​/, offers real life case studies of scams in Singapore and how you can spot the warning signs.

Allocate Assets Efficiently

The diagram above shows the different phases of economic cycles. Can you tell whether the Singapore economy and the global economy at large is in an expansion, crisis, recession or recovery phase? What is most difficult to pinpoint with accuracy is where we are in every phase. Of course, no one will be able to tell how long each phase will last, as it depends on the actions (and the resulting effects) of key parties such as the Government, Central Banks, Institutions and Companies, individuals and consumers as well as fund managers and traders, etc.

In my book, ‘Huat Ah! Building Wealth in Singapore with Unit Trusts’, I shared that we can use the example of a 90­minute football game to provide an estimate of how far we are into each phase. Let’s break every phase into first third (15 to 40 mins of the game), middle third (40 to 65 mins) and final third (65 to 90 minutes). I start with 15 minutes because by the time we can reasonably spot and confirm that we have indeed shifted into the next phase, we are at least a few weeks or months into the phase already.

Which phase of the economy and more importantly how long into the phase do you think we are currently in? I have met clients who told me they feel that we are in a late expansionary phase while others tell me it feels like the early crisis phase, and some say it is the middle crisis phase for them.

Whatever your outlook, it must have a corresponding decision on your asset allocation percentage of shares to bonds to cash that you should hold. Have you made tweaks to your portfolio? Remember the old adage: Cash is King, especially in a recession. A very healthy amount of cash will not only let you ride the next wave of recession, but emerge in a stronger financial position if you capitalise on the many ‘sales’ and ‘discounts’ a recession will present. Check with your trusted financial advisor regarding an efficient allocation of your assets.

 
Derek Gue
Derek Gue

Derek Gue is a Financial Strategist who formulates solutions for his clients to safeguard their income and increase their wealth. He also conducts regular public and lunchtime financial education talks.

Contact Derek to arrange for financial education talks and/or personalised financial planning reviews via bwutbook@gmail.com or visit his website at www.derekgue.com​.