Singaporean Talks Money: September 2022

Saturday 24 September 2022

4 tips I have learned on how to manage my finances & when I started investing

Everyone starts from somewhere in terms of your financial journey. Of course, if you can start early and start doing things “right”, it gives you an edge and the good habits compound. Through my financial journey since 2017, I have read numerous articles and I think the below 4 tips can help many people in managing their money.

Budget and track your expenses or at least, be aware of your spending habits

It’s important to know your expenses and how exactly your money is being used when your salary comes in. Tracking your expenses might not be easy and to be honest, I don’t track my expenses but I make sure at the end of my credit card billing cycle, I am aware how much I have spent, whether I have overspend on that month and if so, which was my highest spending category.

Having a budget helps as well and working to stay within the budget will allow your savings and amount to invest be standardised monthly. Of course, the first few months when you get your pay, you need to try out different budget amount to see which fits you and once it is finalised, make sure to stick to it.

Keep yourself updated on financial information and news

You don’t have to really keep yourself so updated on financial news but know what is happening in the big picture to prep yourself if there is going to be fluctuations in your portfolio. Just like how you want to know what’s happening in the world, it is also important to know the companies in your portfolio or at least what the macro-environment is like if you are buying into index ETFs.

More importantly, know the products your money is in. If you have a REITs portfolio, know the instrument that you are using to invest (eg. brokerage) whether it is custodian and how safe your assets are also, know what REITs are in the portfolio or what individual REITs you want.

Of course, if you want to do automated and passive ETF investing, at least understand the ETFs or investment products so that if there is any big news, you would be aware. It is also important to check or rebalance your portfolio. Although there are also times when not checking your portfolio or not being updated can be a blessing in disguise, it is good to be updated and also to know the financial agents who help handle your investments to make sure they are doing well.

Knowing your risk appetite

This is important to ensure you are not making yourself anxious based on the investments that you are making. Also, knowing your risk appetite can adjust your portfolio accordingly or contributions and funds being put aside.

For example, if you are a low risk person, you can allocate a portion to the stock market and add bonds into your portfolio to ensure that it does not fluctuate too much. Being low risk might mean no or a very minimal position in cryptocurrencies in your portfolio judging by how volatile it is. As long as it makes you sleep soundly in the night then I think it should be done that way even if in the long run, your returns are not as huge.

Or you can adjust your risk based on your age and allocate your funds accordingly making sure that you have sufficient emergency funds so that you will have something to fall back on in times of difficulties. After the UST/LUNA crash, I re-looked at my risk appetite and realised that I have been allocating way too much to cryptocurrencies. I am glad I did not cash out my stock holdings to move to crypto completely and instead will lower the allocation to crypto and increase my DCA-ing to ETFs.

These are things that you might learn along the way and it is normal to make mistakes as I find that I know more about myself and also reinforces why I wanted to start investing. It is really in times of difficulty and volatility that you learn how you feel and react for example the current down time is really a testing period and it provides a great opportunity to see your character and how you respond to it.

Start investing, automate until you have a substantial portfolio/cash holdings

Lastly, you have to take the first step and get started. You can read up lots and research but you have to get started as they always say time in the market beats timing the market. I would say it is a lot easier creating a brokerage account and setting your automated buys compared to the past where paperwork could take up to weeks before you can get your account.

Of course, seemingly easy and convenient, there might still be inertia to get started and you need to overcome it. For me, one of the best tips is to automate my investments as I found that helped me the most in building it up, the first few months might seem slow depending on the amount you have set. But over time, it will build up. It kinda is a set and “forget” method, if you also like to have some active investments into individual companies, you can set aside money and buy in whenever you think is a good time.

Until I build a substantial portfolio, I will still be automating a portion to ensure that I am investing periodically whether it’s a downward or upward market. This of course, is done as long as I hold a job as we can see now that many people are predicting a recession and huge layoffs but I am still buying in monthly.

Extra point: Build up your wealth buckets starting from your emergency funds + payments bucket before moving onto investments then dreams bucket

InvestmentMoat released an article titled, “A Three-Bucket Financial Framework for Extremely High Earning People (and other Valuable Money Advice)” which explained how a financial advisor helped athletes (big names) to manage their money as we know they can earn enormous sums if they were to become popular and a important asset to the sport/team.

Do go over and give it a read, I think it is a really useful article no matter where you are at. It emphasised the need for a base before reaching out to exciting stuff that you want or have in mind. Or if you have the base ready and you have limited time, maybe you should also focus on the dreams bucket to make sure you have no regrets, of course, this differs among individuals.

Health is wealth but wealth can add experiences to your life

Finances is important as it provides a way for us to enjoy life as well as to live depending on what your budget is and what you have available. However, there are definitely other things in life than your finances like health and experiences.

Having a cushion/buffer of money can improve our mental state or even the way we think as more options might be available for us. That is what we are aiming for when we manage our finances and build it up, whether it is to help us in case of any emergencies or to help us achieve our dreams, having money to be able to do all that is very helpful.

Experiences like travelling and signing up for classes you are interested in can add joy to your life. Managing finances is a great first step in your life and getting started early helps, as the effects compound over the years.

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Saturday 17 September 2022

Inflation seems to stay and countries wants closer & more stable supply sources | Leaders are important and foresight is crucial

In the National Day Rally, cost of living and the economic conditions were talking topics as Mr Lee talked about how the various events happening have caused inflation at a rapid pace and there is nothing much we can do. Countries will prioritise having a more reliable source and this could cost more as they might not look for the cheapest but for something that is more resilience and self-sufficiency is important.

This part really struck me:

The basic reality is that international economic conditions have fundamentally changed. It is not just the pandemic or the war in Ukraine. The recent decades were an exceptional period. Globalisation was in full swing; international trade grew rapidly; China’s economy was growing exponentially, and exporting more and more goods at highly competitive prices all over the world – this brought down the cost of many products, and kept prices world-wide very stable. This era is now over. China’s growth and exports are slowing. Their costs are going up.

No more cheap products

Outsourcing manufacturing to affordable countries that can do mass production at a fast rate was the way to go in previous years as we saw China become the factory of the world, made in China became plastered on almost every product as they were able to provide the best prices for consumers as well as companies.

However in recent times, as the Chinese government sticks to it’s Covid Zero policy, it is affecting factories that have set up their plant in China as numerous lockdowns and strict policy have caused delays and no one can anticipate what and when the next lockdown is.

Countries are now moving their productions to places that provide more reliability for example, Apple will be moving some of the China’s factory production for iPad to Vietnam due to the supply chain disruptions.

High tensions

We can also see countries starting to pay more attention to their supply needs and stopping exports whenever needed for price controls or supply issues. We definitely felt this when chicken supply from Malaysia was stopped and of course other countries like India imposed some limits on exports of sugar for some time.

Country leaders are important and foresight is crucial

We have seen many country leaders fail to do their responsibilities or even to listen to the people. I think it’s been a very tough period for all and with problems building up, gas and fuel prices, supply of food and extreme weathers, people have been wanting their government to do something on a higher level to help.

We have seen what happened in Sri Lanka as fuel prices went up crazily and the currency depreciated. Most recently, Pakistan is facing damaging floods and rebuilding will take a lot of time and effort. Future planning and having the foresight to anticipate challenges is very important for country leaders. As Singapore has a new leader coming on with new blood in the main team, it is very important to make sure our leaders understand the world situation and how Singapore can continue to flourish especially so in tough times.

Past methods might no longer work and I guess even for citizens like us, the future we will face personally will be different so lots of exciting and scary things to see. We are almost done with Q3 2022 and 2023 will come in the blink of an eye, wishing that all is well and that the world can get through the tough times ahead.

References: https://www.pmo.gov.sg/Newsroom/National-Day-Rally-2022-English

https://www.todayonline.com/singapore/ndr-2022-global-inflation-productivity-1974131

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Saturday 10 September 2022

Will retirement be a thing of the past? | Working till old age and why it is needed

We invest so that our money can hopefully grow and be sufficient for us to retire and enjoy our golden years but what if in the future, there is no such thing as retirement meaning that we work through old age. Came across this interesting video on YouTube which presents a whole new perspective on working and retirement.

Summary of video

As we experience a longer life expectancy and falling birth rates, it means that people will be working longer as well. In a way, we will not have the same amount of youths to cover the ageing population as they enter retirement and this means that for the elderly who are still able to contribute to the society will want to do so and might have to.

Companies will need to shift away from focusing on chronological age and look at capabilities, strength and experience. The video also mentioned that there have been rampant amounts of ageism and during the pandemic, age discrimination is very much obvious.

A study by Deloitte showed that as you get older, it showed that you tend to be less willing to adapt and less willing to pitch in. However, it is important to note that age diverse teams showed more engagement and more diversity of opinions.

One interesting example in the video was an example of BMW Group Plant (Germany), they realised that the average age of the workers in 2007 was 39 and by 2017, the average age would raise to 47. The former head of the plant was concerned as older workers would take longer to recover from illnesses and have a decline in physical abilities. The company guaranteed employment to the older workers rather than forcing them into early retirement and instead did some adjustments.

They created a facility in the plant with a team consisting of individuals with a higher average age, taking the younger people out. They then work together and see what will make them work better and be comfortable. A variety of small changes were made for a small cost including a rotation system so that workers will not need to spend 8 hours in one station, providing comfortable chairs and equipment. Within 3 months, the productivity in that team increased by 7%, absenteeism rate was halved and defect rate was dropped to 0. In one year, that particular line proved to the better line than the rest.

Stopping bias against old age will benefit companies

We do see cases of ageism (both young and old but we focus more on older individuals) occurring as employers are concerned if age will affect productivity and results. However, besides that, age brings experience and according to HSBC, 15% less adults will join the workforce within the next 2 decades. The pandemic has also worsen the situation as more couples have decided not to have babies.

Companies that can put ageism aside and instead slowly introduce older workers to their facility will benefit greatly in time to come. As the population ages with lesser youths, if the older workers can continue to contribute to the society, it will also improve their physical and mental health.

Every generation has it’s own concerns

Many of our parents worked for a pretty long time with no breaks in between and life was definitely tough for my mum as her education level means there were certain obstacles for her in her job search. She also stayed long in some of the companies she worked at until she eventually felt that her body could not handle the workload and decided to retire.

For my mum’s generation it was to work hard for a certain amount of years before they could finally take a break although for some, they would have to work through retirement age as they might not have sufficient savings for their daily necessities.

Most millennials and Gen Zs would have a more comfortable life as our parents most likely were able to save money and maybe have a property that have been fully paid so we do not have to worry as much about finances when we are young. However, assets prices like properties and cars have increased substantially and with an average paycheck, it is difficult to save up and be able to afford a property in the short term.

I would think that millennials and Gen Zs will need to work through to retirement as things might not be the same where we will not have a healthy amount of youth available to cover us and with volatile prices and environment, it is really difficult to gauge when should we retire and whether the amount we have kept aside is sufficient. Of course, this is very much based on my short term findings and things might not turn out that way. Our generation is having low birth rates with couples choosing to stay DINK (double income, no kids) means we need to keep ourselves healthy both physically and mentally as we have no children to take care of us when we retire. Naturally, it means we also need more money saved as we do not have children for our retirement plan.

Well, it’s been educational for me knowing that I might need to work past retirement age, or maybe there will be no such thing as retirement just short breaks between my career. The world and companies will have to adapt as the whole dynamics of the population changes. Exciting times ahead and Happy Mid-autumn festival!

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Sunday 4 September 2022

All in on Tesla? | A Korean family ploughed $230,000 of life savings into Tesla!

With the Tesla 3 for 1 split that happened recently, there has been many articles covering Tesla and I came across this article from Business Insider & Tesmanian titled, “An army of Tesla fans in South Korea holds a collective stake of more than $15 billion in Elon Musk's company, putting them among its top shareholders, report says.”

Main points from the article

The title of course gives a glimpse of what it’s going to be about, South Korea’s retail investors have a big stake in Tesla at about more than $15 billion making them among the top shareholders. Housing and lifestyle costs in South Korea has risen to unimaginable levels as the youths struggle to get their own property or even be able to start a family as rising costs deter them.

Many have resorted for a get rich quick method including using stocks and cryptocurrencies to increase their net worth. Young Koreans are increasingly worried about repeating the financial hardships of their grandparents. The poverty rate of older Koreans is the highest among the 38 member countries of the Organization for Economic Cooperation and Development.

Taken from Tesmaian - Bloomberg reported about Park Sunghyun’s family, who sold their house in Seoul, moved into a rented apartment and invested their $230,000 family savings in Tesla stock. They dreamed of buying a bigger house, but the money they made from selling their house was not enough as prices rose significantly and their purchasing power was drastically reduced due to COVID-19 and the situation in the country. Tesla shares have huge appeal as, despite the price drop in 2022, they are still up 1900% over the past three years. “With this man, I thought we could go all-in,” says Sunghyun. She bought the shares at an average price of $668 a share, well below the current $905 (as of this writing).

Short term VS long term gains

The stock market and cryptocurrencies seems to be a place where the majority of individuals aged 20s and 30s hope to double or even 10x their capital within a short period of time. Some have done it like Park Sunghyun while others might not have although most of the time, only the successful cases are being reported or talked about.

AMC, GME, Dogecoin and Shiba Inu coin were the hype when people started talking about how they 10x or 100x their capital and if they did cash out at the right time, there were profits, they made many rich in the short term but of course many lost as well when they entered the market late.

It seems like the stock market and even more so for crypto where it has become like a lottery to pick the right stock or crypto and be ready for it to go to the moon in a few months time. But is investing really all about short term nowadays? Are the times of buying the index ETF and waiting 40 years for the market to be higher behind us? Or maybe index ETFs no longer provides returns that is beating inflation and we need stocks that can give us the double digit % growth hence explaining why people are betting on Tesla to do just that.

As quiet quitting, lay flat and “bai lan” comes up frequently among millenials and gen Zs, it seems like work is no longer enjoyable and everyone aims to get rich young and FIRE to really do things that they are interested in like travelling or making tik tok videos?

Of course, Tesla does have huge growth potential and judging by it’s growth numbers the past few years, if it can hit expectations or even surpass it, the stock will become very valuable. But it’s pretty scary when you see people selling houses to buy it. Well, it could turn out really well or the other way. No matter what, I am still buying Tesla in smaller portions and instead building up on index ETFs. My growth might not be as amazing but I feel the balance in volatility will let me have a better sleep in the night. Would you also go all in on 1 stock?

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Saturday 24 September 2022

4 tips I have learned on how to manage my finances & when I started investing

Budget and track your expenses or at least, be aware of your spending habits

Keep yourself updated on financial information and news

Knowing your risk appetite

Start investing, automate until you have a substantial portfolio/cash holdings

Extra point: Build up your wealth buckets starting from your emergency funds + payments bucket before moving onto investments then dreams bucket

Health is wealth but wealth can add experiences to your life

Saturday 17 September 2022

Inflation seems to stay and countries wants closer & more stable supply sources | Leaders are important and foresight is crucial

No more cheap products

High tensions

Country leaders are important and foresight is crucial

Saturday 10 September 2022

Will retirement be a thing of the past? | Working till old age and why it is needed

Summary of video

Stopping bias against old age will benefit companies

Every generation has it’s own concerns

Sunday 4 September 2022

All in on Tesla? | A Korean family ploughed $230,000 of life savings into Tesla!

Main points from the article

Short term VS long term gains