Here’s how to crunch the numbers and take the risks. 

By Aiden Jewelle Gonzales

We’ve all heard the maxims tossed around like cricket balls in financial circles: “speculate to accumulate”; “buy the dip”; “the trend is your friend.” For those of us – like me – who don’t read The Economist over our morning chai, the phrases fly over our heads almost as fast as our wallets empty during a sale. But hindsight is 20/20, and what 2020 has taught us is that we can never predict the vagaries of life, especially when it comes to our finances. 

The upside of this is that more women have realised the importance of financial independence, with many in the community starting up businesses and looking for ways to handle their own income instead of the age-old tradition of relying on men. But where does one start? I sat down with Veena Naidu, the Head of Institutional Research at Yuanta Securities Thailand, to help make sense of the plethora of options now available to us – from stocks, to bonds, to cryptocurrency, to plain old savings accounts.

Tell us about your background and your experience in this field.

I went to high school in India, and got a Bachelor of Commerce (BCom) degree, what is now known as accounting. Then I did my MBA in Marketing from Delhi University from the Faculty of Management Studies (FMS) before returning to Thailand, where I was offered a job as a research equity analyst. From day one, I loved the job, so here I am 32 years later, having never looked back.

I analyse stocks – the numbers, the spreadsheets, the firm’s profits and losses – and keeping in mind the big picture, I come up with recommendations. However, I started out as a banking analyst for 15 years, and moved on to become Head of Research and Strategist. My role as HOR is to oversee a research team that covers Thai stocks, which means I have a good grasp of what is happening in Thailand, financially. 

Many women in the community have joint bank accounts with their husbands. Would you recommend them?

Women should absolutely be financially independent. Many of the husbands in our society have their own businesses, and you never know how they’ll fare – look at the current world situation.

I, too, have a joint bank account with my husband, but everyone should also have their own bank account and a certain amount of savings, even if they’re housewives with allowances. I’d even recommend having your own personal credit card account, just so you can feel more freedom in your decision making. This advice caters to all, whether you’re working or not.

If someone has never handled their finances before, what are the options available to them?

Plenty. You can not only keep your money in the bank, but you can also invest your income in different assets: for example, funds, which includes stocks and bonds; cryptocurrency; property; gold; and silver.

But let’s first look at the global situation. Because of COVID-19, governments across the world are pumping in money into the economy, to get it out of the pandemic-induced recession. Because of this, interest rates are very low worldwide. In the U.S. it’s at zero percent, and in Europe it’s negative – that means that if you keep money in the banks in Europe, they’ll charge you for it. Even in Thailand, where we usually have high interest rates, they’ve come all the way down to around 0.5 percent, with a possibility of a further cut by the Bank of Thailand. So an investment of THB 1,000 only gets you a return of about THB 5.0 per year, barely anything.

This means that it’s tough for those who want to save because you’ll get hardly any return if you keep your savings in a savings account. Even a fixed deposit, a deposit where you can’t touch your money for a certain number of years but gives you a higher rate of return, currently only has an interest rate of 1-1.5 percent. This creates a phenomenon called ‘the search for yield’ wherein everyone right now is looking for a higher rate of return for their money.

My advice? If you’re looking to start a savings account, create a TMB account and open an All Free Account which gives you an interest rate of 1.6 percent, with minimal limitations such as being able to withdraw only a few times a month. I would recommend this for the for the ultra-conservative among us, who just want to keep money somewhere safe and still earn a little bit of yield.

So how much of your income should go into your savings?

Anywhere between 20-50 percent of your monthly income, depending on the individual. You’ll have to figure this number out yourself. I would’ve said that you’d need to have enough savings that if something goes wrong, you can survive on your own for up to 6-12 months without asking anyone for help. However, looking at the realities of an unforeseen situation like a pandemic, I’d change that analysis and say Millennials should aim to have in your savings account at least enough for 24 months.

The older generation, people over 55, should have more. The search for yield is more for the younger generation – older people’s priority should be protecting your capital; your wealth. For example, I’m 58 right now, and if I’m lucky, I have another 20 years or so. Therefore, I should have enough saved for my expenses for the next 20-25 years, even if there’s no yield at all.

Medical insurance is paramount, as medical expenses are never going to come down. Make sure you have a premium between THB 2-4 million. If you don’t have medical insurance and can’t get any right now, set aside an additional THB 4 million on top of the money you’ve saved, so you won’t be a burden on your children if you get ill.

What percentage would you recommend someone keep in cash, and what percentage in different assets?

For the new generation, have the discipline of saving at least 20 percent of your income per month. No more than 30 percent of your earnings should go into your rent or your mortgage. You’re therefore left with around 50 percent, and 25 percent of that should go into your day-to-day expenses. That leaves you 25 percent that should go into investment – but it’s very individual. If you spend less, you can also invest more.

I recommend that people start investing early because when your pay is low, your risk is also low when you invest and you get to learn how to invest at a young age. For someone young, I’d say start investing as early as possible from the very first month that you start earning – put in even THB 1,000-2,000 per month.

What investment opportunities would you recommend for people just starting out?

Let’s start with index funds. Some who are in the know like to invest when the market falls, like right now – that’s what’s called ‘buying the dip.’ But if you don’t have time to actively research which stocks to buy, I’d recommend buying an index fund.

An index is a report of the changes in a specific financial market or of the economy as a whole. What an index fund does is it tracks the index. For example, we have the SET50 Index. It tracks the top 50 stocks (in terms of the company’s value, also called market capitalisation) in the Stock Exchange of Thailand (SET). If you buy the SET50 Index Fund, you’re buying all 50 of the top stocks. This means that you’ll win or lose depending on the market – if the market goes up, your fund will go up, if it goes down, it’ll go down. You’ll neither outperform or underperform.

For those not in the finance industry, or not willing to analyse stocks deeper, I’d recommend putting a certain amount of money in an index fund every month, especially with the ultra-low interest rates in banks right now.

What are the types of index funds you can invest in?

You have two different index funds: equity and bond. Equity index funds invest primarily in stocks, or shares, of a company. Bond index funds invest in bonds, which is basically like a debt owed to you. They’re issued by firms (corporate bonds) or the government (government bonds).

I’m a bit of a risk taker, so I prefer equity funds to fixed income funds. Corporate bonds of big cap stocks like PTT, CPALL, or LH is another option. These are solid firms that will pay good interest rates – it’s around three percent now, which is still much better than savings in a bank.

Bond index funds are for people who are more conservative, or who have a low risk appetite – they give you less yield, but they’re less volatile than equities. When picking bonds, I prefer corporate bonds to government bonds. But don’t go for high risk, smaller companies. We call them junk bonds – they pay you eight, nine percent in yield but you shouldn’t go for it unless you have a risk appetite and you have a lot of money to spare. Just go with the big corporates.

What are the other investment opportunities you’d recommend?

For the younger generation, cryptocurrency. It doesn’t have to be Bitcoin, but invest a little bit in crypto. Soon, Blockchain is going to connect everything through the Internet of Things (IoT), which is where the world is headed right now – ultraconnectivity.

Invest in gold and silver. The reason they’re so important now is because of these low interest rates, and people want something solid in their hand. Silver is doing even better than gold because it also has an industrial use. You don’t even have to buy physical gold or silver – you can buy gold or silver funds.

Property is also a good thing to invest in right now, keeping in mind that at the end of the day, property is a very personal decision. You don’t get to see these property prices that often, and once Thailand opens up again, there will be a lot of retirees coming here because of how well we’ve handled the pandemic. The demand for property will be even greater. 

So now that we know our options, we’re ready to invest. Where do we start?

If you’re new, start with talking to your bank. They’ll have a private wealth manager who’ll walk you through your options. It can be very overwhelming, but don’t be scared to ask specific questions. Ask them to explain everything to you in laymen’s terms. Only go with something that you’re comfortable with. You can buy funds through your bank, and they’ll also know when corporate bonds are issued. Most corporate bonds are underwritten, which means that banks make sure that the funds are fully subscribed. If they know you’re interested, your bank will call you when the bonds are issued and give you the details. You can also check out the asset management arm of the individual websites of different banks. All the information is there.

Secondly, visit the website m.investing.com. It lists out all the funds from all the banks, as well as gold and silver funds, and the movement of Bitcoin. It’ll tell you what to invest in. I’d recommend visiting this site every day just to be aware of the financial landscape in Thailand.

Thirdly, check out one of the renowned investment management companies like BlackRock or The Vanguard Group. They’ll have emerging or developing market funds that you can buy online, on their website. I’d suggest buying a mixture of both. Vanguard, for example, has one of the top performing funds in the world.

Finally, open a Robinhood account, which will enable you to trade U.S. stocks at minimal cost.

For those who’ve done their research and want to trade more actively, what stocks would you recommend we invest in, and which ones should we avoid?

Look at the industry, and look at the country it’s in. We can see during this COVID-19 situation that the stocks that went up are all the tech stocks. Most of the old economy got hit hard. I’d say invest in the tech sector, A.I., robotics, pharma, and green energy. Vanguard or BlackRock will have many of these international funds to invest in.

When picking a specific company to invest in, you need to look at how it’s growing, its revenue and earnings, and how it’s growing compared to its competitors. Then you have to look at the Price to Earnings Ratio (PER) which means what price you want to pay for how much they’re earning. Some industries will trade at cheap PERs, some at expensive PERs, so you’ll have to look at the average for the industry. The service sector, for example, which is big in Thailand, will have an expensive PER. Tech firms also trade at high PER due to strong business growth.

In terms of Thai stocks, invest in department stores – such as Central Group or The Mall Group – and hospitals. However, take note that some hospitals will take a while to bounce back because most of their clients are from abroad. Avoid investing in airlines, airports, and hotels right now, due to COVID-19.

You have to diversify not just in terms of asset class, but also countries. That’s why wealth managers are important – they’ll tell you which country to invest in depending on which industry you’re interested in. Semi-conductors, for example, you’ll have to invest in Taiwanese companies. For tech, you’ll have to invest in the U.S. or in China.

Aside from investment, a big part of wealth management is avoiding too much debt. What is your advice?

I’m not actually against some debt, especially for the younger generations. Debt helps you to grow. For example, you can’t buy property without debt, and nowadays, you can get a 30-year mortgage rate at 2.5 to 2.6 percent.

But look at your income first, don’t be over-exuberant, and don’t over-leverage. A healthy amount of debt shouldn’t necessarily be based on your salary, but on your ability to pay it back. From your income, no more than 30 percent should go into servicing the debt. But you must first be able to save a certain amount per month.

Never take a credit card loan. The interest rate is too high. When your monthly credit card bill comes, just pay in full. Banks don’t like it, but it gives you a good credit score.

How else do you maintain a good credit score?

Be on time with your payments, and finish it off a bit early if you can. For example, if you get a pay jump and your salary goes up by 50 percent, instead of your instalment being THB 20,000 per month, pay THB 40,000. Or if a lump sum bonus comes in, instead of buying a new purse, just walk from one bank to the other bank and pay it off.

Any final advice?

Don’t ignore the economic news. A lot of economists and banks have podcasts, plug one in on the way to work! Be aware of the global situation and how that’s going to affect things – for example, bigger houses are in fashion because more people are working from home.

At the end of the day, when investing, be cautious, but don’t be scared.