Financial Review - Year 2010

It's a new year and a good time to look back over the year of 2010 to review our financial standings, i.e. what we have done great and what needs improvement. Here's the review for my financial situation:

The Great Stuffs:

1. Expenses: Compared to year 2009, expenses decreased 2.3% despite the ever increasing inflation. This is a great achievement!
2. Savings: Compared to year 2009, savings increased 25% over the year of 2010. Again, this is great achievement despite the meagre increment and higher inflation in the year 2010.
3. Investments: A superb year in investments overall (especially local stocks/funds), thanks to the great rally of stock markets for most part of the year 2010.

The Not-So-Great Stuffs:

1. Overseas Investments: Returns have been relatively flat or slightly negative, mainly due to currency appreciation of Ringgit that diminished most of the returns of foreign funds which are usually dominated in USD.
2. Over cautious: I have been too pessimistic over the stock market rally for the past year, and too profit far too early. I should have also allocate more money for stocks rather than bonds.

Changes for Year 2011:
I expect year 2011 to be much more volatile with higher downside risks, mainly due to the long running rally over the past year. With this investment perspective, I would make changes to my investment portfolio as follow:

1. Focus on local investments: This is due to the more defensive nature of Malaysian stock market. Investments into local stocks/funds will be split into blue chips, dividend play and REITs.
2. Dollar cost averaging: Will start dollar cost averaging on local funds in anticipation of more downside risks, with some lump sum investments when the market crash/panics.
3. Streamline overseas investments: Further lump sum investments will be mainly on Asian and emerging market funds when the market crash/panics.

I will detail fund switching/new investments in the future articles whenever possible. So, what's your view on the performance of stock markets in the coming months?