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.

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.

Earn 71x your Savings Account Interest Rates

On The Sunday Times, well-known Invest Editor, Lorna Tan, wrote an article on "Higher interest on enhanced savings plan".

Link here: http://www.straitstimes.com/business/invest/higher-interest-on-enhanced-savings-plan-investroundup

Similar to the article we wrote previously below (12May2017), it highlights the Maybank SaveUp savings programme:

The Sunday Times highlights a savings programme, two insurance products and a new personal finance mobile app.

The Save Up programme was enhanced on June 1. Maybank customers now have nine options to choose from, to help them achieve the maximum interest rate of 3 per cent a year.

The deposit cap for the bonus interest has also been raised, so customers can enjoy higher interest on the first $60,000 in their SaveUp Account, up from $50,000.

[Published on 12 May 2017]
[Updated with Maybank SaveUp account. Thanks reader for the updates]
Previously we shared how you can easily earned 20x your Savings Account Rates without even leaving your home... simply by just opening an online account and transfer your funds in.

If you have not read how you can easily earn 20x, click on the link below:
Easily earn 20x your Savings Account Interest Rates

To earn 71x, you need to work a bit. Don't worry, it's achievable and mostly automated :) If you don't know yet, nowadays banks are giving higher interest rates on your deposit if you use their services. These are the 3 common things you need to do:

1) Spend on their Credit Card

2) Pay Giro bills using their account

3) Deposit your salary to their bank

Checkout the interest rate (last column) below:

Take example of the last highlighted row, to enjoy 3.55% interest rate (that is 71x your Savings Account of 0.05%), you need to open an account from Bank Of China (BoC) called SmartSaver and do the following:

1) Spend $1,500 on their credit card

2) Set-up a Giro or pay your bills to 3 different account numbers with minimally $30 each bill (can be your credit card bills, utilities, mobile, tax, etc.)

3) Inform your HR to transfer your salary here with net salary (after CPF, etc.) of more than $6,000

Note: Actually there's additional bonus that is not indicated here where any incremental value compared to last month balance, you will get additional 0.6% making it a total of 4.15% (3.55% + 0.6%). And that comes to 83x your savings account rates. But the amount is based on only the incremental value and not your total savings/balance in the account. Thus we did not include in the overall calculation.

If the credit card expenses and/or the salary is hard to achieve, you can look at the lower tier one where you just need to:

1) Spend $500 on their credit card

2) Set-up 3x Giro/bills with $30 each

3) Deposit net salary of $2,000

With this you will get 2.35%; that is 47x your savings account rates.

Note: Not all company have the option to deposit your salary to BoC. If your company doesn't allow, the next best option is Maybank. If still cannot, then it'll be either UOB or OCBC account.

If you have more than $30,000 in your savings, then UOB One Account is preferred. Else can use OCBC 360 Account which gives you slightly higher interest rate.

For UOB One Acc, the interest rates are incremental from 1.5%~3.33% depending on your balance. If you have $50,000 fixed, then you will enjoy an interest rate of 2.48%. That is, monthly you will get $103! Compared to just $2 if you put into your Savings Account. And you just need to do 2 things:

1) Spend $500 on their credit card

2a) Set-up 3x Giro/bills   OR

2b) Deposit net salary of $2,000

If you are still keeping your money in your normal Bank Savings Account, don't waste your time anymore, take action now!

So instead of having a free McChicken ($2) every month, you can get yourself and your loved one a free buffet for 2 ($100) every month :)

If we would to rank them (based on salary of <$6,000 & card bills >$500):

1) 3.00% Maybank SaveUP
2) 2.48% UOB One Account
3) 2.35% BoC SmartSaver

Consolidated banks interest rates:

Easily earn 20x your Savings Account Interest Rates

Have you notice that your savings account is giving you less than $1 of interest per month? Or some even less than $10 per year.
Well, this is because your normal Savings Account interest rates is just 0.05% per year.

Yes, it's just "0.05%", not even 0.5%. It's 20x lower than 1%.
It's "per year" and not per month. It's about 0.004% per month. Yup, it's 250x lower than 1%.

Well, you can immediately earn 20x more than your pathetic interest rate of 0.05%/yr by opening a CIMB FastSaver Account online here:
http://www.cimbbank.com.sg/en/personal/products/accounts/savings-accounts/cimb-fastsaver-account.html

By just registering online, your CIMB FastSaver account number will be issued instantly. With the account number you can then transfer your Singapore Dollar funds from your existing bank to this new account number.
And voila.. from this very second onwards, your money starts to earn 1%/yr instantly. It's that simple.

To give you some perspective, if you have $20,000 in your POSB Savings Account, by the end of year, when you update your passbook, you will see an extra of $10 for interest.
But for CIMB FastSaver, every month you will see an extra $16 (yup, it's monthly and not typo). If per year, it's $200!

That is a $190 difference!

With this simple step, you can also easily beat current standard FD (Fixed Deposit) rates. E.g. as of 28April2017, DBS 12-month FD is 0.35%/yr.

CIMB FastSaver account is a normal savings account with no "lock-in" period like FD (Fixed Deposits). They don't even have "fall below fee" which some banks charge $5/mth if your balance is less than $3,000!

-----------------------------------------------------------
You might be thinking, well, even if it's 20x it's still 1%.. You still feel it's low. Well stay tuned, next we will share how to earn 71x your normal savings account rates with up to 3.55%!

Compound Interest

What is "Compound Interest"?
Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. Compound interest can be thought of as "interest on interest" and will make a deposit or loan grow at a faster rate than simple interest, which is interest calculated only on the principal amount.
[Source: Investopedia]

For simple interest, if you put in $100 with 6% annual interest, by end of Year 1, you would get $106; end of Year 2, you will get $112; end of Year 3, you will get $118.
Every year you get $6 interest.

For compound interest, if you put in $100 with 6% annual interest, by end of Year 1, you would get $106 (same as normal interest); end of Year 2, you will get $112.36; end of Year 3, you will get $119.10.
If you notice, by end of Year 2, you will get extra $0.36 and by end of Year 3 you will get an extra $1.10 compared with normal interest. This is what compounding is, where your interest earned also earn interest for you (e.g. additional 6% on the Year 1's $6 earned interest). 

Though the difference is not that great for the first few years, but by end of Year 9, you will notice the difference is getting bigger, to be precise 9.7% more. Populated below is the difference of the interest earned between normal interest (in blue) against compound interest (in orange) based on 6% interest:

As you can see that the orange line (which represents the compounding interest) starts to move exponentially as the time goes. Whereas the blue line (normal interest) just goes up in a line.

This is what happen when you leave your interest gained to be reinvested again making the interest that you earned to earned further interest.

This is the power of compounding interest and as quoted by Albert Einstein:
"Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it."

About the last few words: "he who doesn't ... pays it." What it meant is that it's also applicable for loans or credit that you borrow. E.g. if you just pay the minimum amount of your credit card bill, your loan amount will be like the orange line above where it'll grow and skewed upwards.

Just to add:

For Simple Interest, it takes 17 years to double your money at 6% interest, but Compound Interest takes only 12 years. It saves you 5 years!
By end of Year 21, the interest gained from Compound Interest is 50% more than Simple Interest

Just add another 9 years, by end of Year 30, the interest gained by Compound Interest is 100% more! That is double the total interest earned by Simple Interest

Wealth Enhancement

The Wealth Enhancement maximises the growth potential of your assets. We help you develop an investment program that is appropriate to your unique situation, yet will grow at a rate you desire. With the help of our proprietary tools, you stand a better chance of enhancing your investment return, thereby fulfilling your long term financial dreams.

Key considerations:

• Cash investment
• CPF investments
• SRS investment

Five Steps of Financial Planning

Basically there are only five steps to a financial planning process:

1. Gather & Establish Objective
2. Analyse & Evaluate Information
3. Develop Plans and Recommendations
4. Implement Plans & Recommendations
5. Review Periodically

Five Pillars of Wealth

The Five Pillars of Wealth are the essential elements in a comprehensive framework that covers the wealth management needs of an individual from a complete perspective. Every individual who cares about his/her financial life will benefit from this framework whether he/she is just getting by, rich, poor or broke. Later we shall see that dire consequences await those who do not adequately address any of the crucial pillars of wealth management.

1. Wealth Maintenance
2. Wealth Accumulation
3. Wealth Protection & Preservation
4. Wealth Enhancement
5. Wealth Distribution

Or Wealth M.A.P.P.E.D in short.