Economic Challenges : Strategize Your Investments

The global economy in the second half of 2024 can be seen as bleak but promising. Most of the economic outlook this year describes the economy is coupled with volatility, geopolitical tensions, inflations fluidity and not to discount technological disruptions.

These, however, do not render the fact that investors should remain pessimists about their investment opportunities.

Despite economic challenges in 2024 (to a certain extent in the first half of 2025), investors can mitigate risks and avoid losses by implementing five smart strategies.

This article aims to explore key economic challenges in 2024 and offer some strategic advice for investing in today’s economy.

The Economic Challenges of 2024

There are four big challenges for the global economy in 2024.

First, the economy is still tackling global inflation and interest rate hikes, although the majority of forecasts suggest the economy is in its stabilising mode.

The IMF in April this year describes “global recovery is steady but slow and differs by region” (IMF, 2024)[i].

Core inflation should be declining steadily towards the end of 2024 and into 2025 with a smooth pace recovery for advanced economies in comparison with emerging economies.

In the Malaysian context, BNM has been capping a 3.0% interest rate beginning June 2023, the reason being controlled consumer price inflation is kept at 2.5% and a growing Ringgit appreciation.

Second, geopolitical instability. Two major events pose risks to conflict escalation worldwide besides existing frictions throughout all areas in the conflict zones.

Ukrainian-Russo military engagement is still ongoing and showing no signs of de-escalation from both sides.

Hamas-Israeli conflicts have been escalated to a regional concern especially when more than 190 commercial vessels have been attacked by the Houthi rebels from Southern Yemen. In response, the US and UK counter-strike towards the rebels have turned the Red Sea into military engagements.

Third, uncontrollable technological advancement has posed higher risks of scams and fraud.

An accelerated shift toward AI and automation has replaced manpower and human capacity with algorithms and data.

Financial wrongdoings can happen faster, losses can be bigger and investment manipulation can happen more rampant.

In Malaysia, there is a systematic scheme of investment packages, done over SNS like Telegram.

Senior citizens with large amounts of savings are the easier targets.

Fourth, climate change and sustainability concerns will impact on the human productivity and global supply chain.

Malaysia has received more rain in the last 4 years with mean annual precipitation of 3085.5 mm whereas the country normally receives between 2000 to 2500mm.[ii] The country faces risks of environmental disasters such as flash floods, landslides, and sinkholes as a result of extra rain.

Key Strategies for Investment in 2024

There are four smart strategies worth considered.

Keywords include diversification, long-term growth investment, emergency fund and staying informed.

Diversification is a key strategy to reduce risk when investing.

Instead of putting all your money into one type of asset, such as stocks, it's smarter to spread your investments across different asset classes like bonds, real estate, and commodities.

The idea is that if one type of investment performs poorly, others may do well, balancing out our overall returns.

For example, if the stock market takes a downturn, investments in real estate or commodities like gold might hold steady or even increase in value.

This helps protect our portfolio from major or total loss. Balancing higher-risk assets, like stocks, with safer ones, like government bonds or gold, creates a more stable and resilient investment plan.

Investing in sectors with long-term growth potential is another effective strategy for building wealth over time.

Areas like renewable energy, healthcare, and technology are expected to expand in the coming years, driven by increasing demand and innovation.

Over the recent years, many investors today have also placed a greater emphasis on sustainability and Environmental, Social, and Governance (ESG) criteria.

This means investing in companies that not only aim for profit but also work to minimize their environmental impact and promote social responsibility.

These companies are often more resilient in the long run, making them attractive to investors with a forward-looking approach.

In any economic climate, having an emergency fund is one of the most important steps an individual or investor can take.

This fund acts as a financial cushion, allowing investors to cover unexpected expenses or manage temporary losses in their investments without the need to sell off assets at a bad time.

Liquidity—having easy access to cash or cash-equivalent assets—might sound traditional, but there are reasons why being a traditionalist can sustain business operations.

For individuals and laymen, it is wise to invest in low-risk investments.

Returns might not be high and fast, but these investments can serve as cash reserves when the situation is uptight.

Products like Amanah Saham Bumiputera, Amanah Saham Nasional, and other PNB products are considered safe havens as they are government-backed investments, against market volatility.

We need to feel safe and secure, hence choosing a low-risk will never be a mistake.

In today's fast-changing economic environment, staying informed is crucial for making sound investment decisions.

Investors should regularly monitor market trends, financial news, and key economic indicators such as interest rates and inflation.

Keeping an eye on these factors helps investors understand the larger economic picture, making it easier to anticipate shifts in the market and adjust their strategies accordingly.

As explained, geopolitical instability, technological disruptions, and climate change are tied to investment prospects in 2024 and beyond.

To recap, the article speaks on the main challenges in the global economic outlook and 5 smart strategies for investors to navigate the challenges.

It is acknowledged that this is a difficult moment, but navigation will be sustainable if investments are done through informed, diversified, and adaptive investment approaches.

Let’s stay proactive, informed, and diversified throughout 2024 and 2025.

Source:

i https://www.imf.org/en/Publications/WEO/Issues/2024/04/16/world-economic-outlook-april-2024

ii https://tradingeconomics.com/malaysia/precipitation