Understand Yourself before making that Investment Decision

When it comes to investing, a lot of people tend to forget one thing - they aren't absolutely sure what kind/type of investor they are.

Regardless of the varying investment philosophies that we advocate to, we are all synchronised with the identical set of emotions that investment subscribe us into - that is, Fear & Greed.

What separates us (Investor), in my opinion, is the management of this set of emotions. The quality of management arguably determines/affects the timing that an Investor enters (buy) and/or exits (sell) the market.


"Be greedy when everyone is fearful, be fearful when everyone is greedy" - Warren Buffet

I am sure most of us (if not all) could fully appreciate this quote, albeit inculcating this into our daily investment decisions is possibly, but, another different story. From his quote, I also like to think that Mr. Buffet agrees that emotions is inevitably involved when it comes to investment.

If you haven't realised that I had already attempted to highlight this through the header of my sharing, I would like to emphasise here that you should start asking yourself: What type of investor are you?

Do you prefer income over capital appreciation?
What is your investment time frame?
What is your expected return?
How would you anticipate your course of action to be when your portfolio dip by 10/20/30%?

The above is only a sample set of questions, when answered, aid to deduce the type of investor in you. It is not limited to these examples, and definitely not meant to be exhaustive as well. But to a certain extent, it would probably give you a better evaluation after these questions have been answered. And before that, your expectation and emotions could arguably be misguided.

So in order to avoid making "emotional" mistakes in investing, I suggest doing this:

1. Be Diversified - Own asset classes that have very minimal correlation;
2. Adopt asset allocation in accordance/alignment to your risk profile;
3. Allocate "Reserves" to "capitalise" on market sale, ie. enter when prices are lower;
4. Determine your investment time horizon. If it is to be 10 years, whatever happens this week is just "noise";
5. Work with a Financial Advisor to assist you in monitoring your portfolio and offer you advice.

Whilst the above list is not meant to be exhaustive, I think it still serves as a rather decent start. But if that still poses a challenge to your time, then at least have a trusted advisor!

TST: Wealth Management: Views on Financial Planning and Money Management

Below is the screen capture from the Sunday Times earlier this week:

You can notice that for Retirement Planning, more than 70% wants their retirement fund to be enough to maintain current lifestyle and their family is well protected and provided for when they retire.

And the Top 4 topics where investors need more information is:
1) Writing a Will
2) Lasting Power of Attorney (LPA)
3) Estate Planning
4) Succession Planning

For Writing a Will with 78% requiring more information, we have ample information about it in this blog, check this out especially:
1) Does everybody have a Will?
2) FAQ on Will
3) CheatSheet : Estate Distribution

As for the LPA, we will be sharing what is LPA and the FAQs about LPA next month.
If you need any clarification, feel free to contact us.

FAQ on Will

Below are some of the FAQs that we received from our friends and clients. If you have any queries, please feel free to let us know or just drop us a comment below.

Can I make my own will?
Yes, you can. But it's not recommend. It's best left to the professional.
E.g. if you owned a Lexus and would like to pass it to your son when you passes on. In your Will, you indicated "to give Lexus car to my son". If you have changed your car to BMW, upon your demise, your executor will need to sell your BMW and purchase a Lexus for your son.
Being smart alec, you rephrase it to "to give a car to my son". But then if you have sold your car and/or bought a yacht, then the executor will need to find monies or sell your yacht to buy a car for your son.

What can I put into the Will?
Basically you can put all your estate in your Will except those governed by the law. Refer to the Cheat Sheet here for quick reference on what can and cannot be distributed by law.

How about estate that is overseas?
Estate is divided into 2 types: Movable and Immovable Estate.
For movable estate such as overseas bank accounts, investment, etc. it can be distributed via your Will locally here.
For immovable estate such as overseas properties, land title, etc. it's best to do up a will at the respective country. Immovable estate are usually governed by the respective country's laws.

Is it possible that my Will be revoked?
Yes, when you marry or re-marry unless it's mentioned in the Will.

How about if I'm divorced?
No, divorce does not revoke your Will. So do update your Will promptly after change in marital status.
To add-on, without a Will, even after you file for divorce, the Intestate Succession Act (where you spouse is entitled to HALF of ALL your properties) continues to apply until the date of Final Judgment.
And your spouse also have the FIRST RIGHT to apply for the letter of the administration from the court to deal with all your estate!

Is the Will best kept in a safe place e.g. Bank Safe?
Yes, it should be kept in a safe place but it's a no no to keep in the Bank Safe. Because no one other than yourself has the access to the Bank Safe. However you can consider keeping it in a "fire proof" safe deposit box at home.
Since the Executor needs it to carry out your Will, it would make sense that the Will should be made known where it is especially for the Executor and/or Beneficiaries. If not, you can consider registering your Will location at the "Will Registry" maintained by the Public Trustee of Singapore.
If the Will cannot be found, then the estate will be distributed based on the The Intestate Succession Act.

Other than Will, anything else I need to consider?
Will is effective only upon death. If one is diagnosed with dementia, stroke or in coma, the Will will not take into effect. For these, you will need Lasting Power of Attorney (LPA) or Advanced Medical Directive (AMD) so that the decision can be assigned to someone when you are in no condition to make.

[Case Studies] No Will can cost you stamp fees and legal fees on the house

A family consists of a husband, wife and 2 young children. They live in the same HDB house with husband paying and owning the house. The wife and children are just occupier of the house.

When the husband passes on, with no Will, based on The Intestate Succession Act, the wife is entitled to 50% of the house and the 2 children, 25% each. This is entitlement and is not automatically transfer/given. The wife will need to apply to the court for letter of administration to transfer half of the flat to herself and most probably she will also wants to buy over the other half share from their young children.

This will cost the wife tens of thousands of dollars in stamp fees and legal fees for the transfer.
With a Will, the transfer costs only few hundred dollars. And more importantly the process is much faster especially during this devastating period for the family where the wife will not need go through the tedious process of applying for the letter of administration and carry out the paper works.

Note: If the HDB house is owned under "Joint Tenancy" with the wife, then the husband portion will be automatically transferred to the wife. In this case, the Will will not supersede the transfer/allocation.

Recommended Reading on Will:

• Does Everybody Have a Will?
• Cheat Sheet: Estate Distribution

Save for your Retirement, and Save on your Taxes, altogether!

As we embark on the final Quarter of 2017, we would like to suggest to our readers to review your tax obligation, and perhaps, explore some ways to optimise your tax dollars. Arguably, one of the most effective ways to do this, is via the Supplementary Retirement Scheme (SRS). Through contribution to the SRS account, the Tax-Payor adopts a "one-stone-kills-two-birds" kind of strategy and hence, enhances the effectiveness on his/her tax dollars.

SRS is part of the Singapore Government's effort to address the financial needs of our greying population. It began in 2001 and is operated by the private sector. As the name suggests, the scheme aims to supplement and/or complement the various solutions in our current CPF system, ie. CPF LIFE, Minimum Sum, & etc.

The SRS offers attractive tax benefits. Contributions to SRS are eligible for tax relief. In another words, each dollar of contribution into your SRS account reduces your chargeable income by the same value in the that particular year of contribution. You can invest the savings in your SRS account in several investment instruments. Moreover, your investment returns are accumulated tax-free and ONLY 50% of the withdrawals from SRS are taxable at retirement (this is commonly referred to as "50% tax concession"). For more information on how withdrawals will be taxed, you may like to refer to IRAS' website.

The current annual SRS contribution cap is:

(i) $15,300 for Singapore Citizens & Permanent Residents;

and,

(ii) $35,700 for Foreigners.

Although it does not require a Tax resident to be on a super pay scale to feel appropriately incentivised/motivated to introduce and infuse SRS as part of his/her retirement income solution, just in case some of you might like to study this "mathematically", we have written another article to shed some light in that perspective. And for the keen readers who are hungry for information, you can find everything you need to know about SRS here.

Putting your money away in your SRS account is one thing; the next thing that you would need to consider is how to grow the money in your SRS account. Do stay tune for our subsequent newsletter as we would like to share with you on some of these viable options available in the market currently.

Save 11.5% immediately if are earning >$96,600 per year! Save 7% if you are earning >$51,000

Have you estimated your earned income yet? Have you add in:
- 13month bonus
- Staff discount
- Allowances
Yes, above are some of the income that is earned and taxable.

If you have estimated your earned income to be >$51,000* you can consider putting it to SRS. Cause every dollar set aside will save you 7%.
E.g. If you set aside $1,000 to your SRS, you will save $70 of tax immediately. And if you set aside the SRS maximum of $15,300, you will save $1,071 of tax.

*For simplification, we use $51,000 minus CPF contribution of $10,000 and earned income rebate of $1,000 gives you a chargeable income of $40,000.
Based on IRAS, anything above $40,000 the tax rate is 7% up to $40,000.

If your estimated earning is > $96,600** then every dollar you put aside will save you a whopping 11.5%!
E.g. If you set aside $1,000 to your SRS, you will save $115 of tax.
If you set aside the SRS Maximum amount, you will save $1,756.

This is not every dollar save, every dollar earned.
This is every dollar save, a dollar and twelve cents earned!





Left Image: Get tax relief while building your nest egg
by Lorna Tan on Nov 1, 2015


**Similarly, for simplification, we use $96,600 minus CPF contribution of $15,600 ($6k x 13mth x 20%) and earned income rebate of $1,000 gives you a chargeable income of $80,000.
Based on IRAS, anything above $80,000 the tax rate is 11.5% up to $40,000.

Below is the table for tax savings based on your monthly salary with 10% of your annual income contributed to SRS:

So start saving now! If you have concern on SRS matters such as withdrawal, post your comments below or check with your financial advisor.