The Truth About Investing And How You Can Start: Part 2

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I previously wrote an article regarding some of the common misconceptions and reasons why beginners are not investing here. You can check out Part 1 first before continuing this article!

As a newbie investor, other than the 3 common reasons highlighted in Part 1, these are a 2 more reasons why beginners are not investing even though it is so important to invest from an early age.

Reason 1: Lack of Exposure to Financial Literacy

Personal Finance and Investing are extremely important life skills to acquire because firstly, they are lifelong skills that sticks with you for life and secondly, with good money management skills you will be able to control your money, instead of letting money control you.

We spend the past 20 years in school not learning a thing about investing but instead cramming our heads with equations, excessive scientific knowledge that are not practical in real life etc rather than learning how to practice good personal finance habits or investing principles.

Upon graduation, students then come out to the work force and assume that investing is risky but what they don’t realise is that investing is the answer to financial freedom and by not investing, you will actually be stuck in the rat race till age 65 (or more).

Every 10 years you delay to invest, you are incurring an unimaginable amount of opportunity cost in the process. This is a point that has been reiterated over and over again and that is because it’s a fact and if you still refuse to start, you are only shortchanging yourself and no one else.

Financial literacy is gaining more awareness in my generation, with more and more people understanding the difference between gambling and investing and understanding the importance of investing early so as to reap a bigger compounded return.

Understanding how to budget is also extremely important, and one should understand the difference between Investment, Savings and Protection because in order to start investing, you need a good foundation of savings and protection covered before you can move on to generate wealth.

Many people avoid topics when it comes to protection because Insurance is seen as a taboo and often seen in a negative light especially in an Asian society like Singapore. In fact, most Singaporeans are actually under-insured based on statistics. One should understand that insurance is an essential portion when it comes to your overall wealth as it ensures that you have your risk covered. You must understand that by paying the right insurance payments based on your needs, you are essentially paying pennies for dollars should God forbid anything happen.

Usually when something bad already happens, it is already too late to start regretting. So before the storm comes, get yourself an umbrella so that you are covered during a thunderstorm.

Aside from Protection needs, it is recommended to have at least 6 months worth of salary saved up as Emergency Savings in case of retrenchment like the situation we have right now (Covid-19). This emergency fund is used to provide at least 6 months worth of your income while you look for a new job, and at least ensures a buffer or lifeline before you have a constant active income again.

A common misconception about emergency savings is that it is used in an unfortunate event like a major accident or severe illness. What many people don’t realise is that this risk can actually be transferred. How so?

  1. Major accident –> Transfer risk by buying a Personal Accident Insurance Plan
  2. Severe Illness –> Transfer risk by buying a Critical Illness Insurance Plan
  3. Hospital Bills –> Transfer risk by buying a Hospitalisation Plan
Transferring Risk

To grasp this concept may not be easy, because of the pre-existing assumption that insurance is bad and even a “scam” based on previous generation’s experiences and past conditioning. So my question to you is: Would you rather pay for these unfortunate events (should they happen) yourself or transfer this burden to someone else? The answer is for you to decide.

Once you understand the clear difference and purpose between an Emergency Savings Fund and money set out for protection needs, you can now use the spare money that you have to invest!

*Figure out if you have your 6 months emergency fund set up and enough insurance protection, then you can talk about investing (or growing your wealth).

Reason 2: Not knowing how much to invest (as a result of knowledge gap)

“How much do people invest ah?”, “Investing need like 1 million or something right?”, “He must be rich, that’s why can invest.”

Does it sound familiar? If yes, you are a victim of reason number 2.

The concept about investing or building wealth in general, is that people who give an excuse and say “I will invest when I get more money“, ‘When I start working” or “When I get a pay raise” is simply ironic. It is equivalent to an obese person telling themselves “I will start exercising when I lose 20 pounds.

Investing is not a good-to-do but instead, a must-do because it allows your hard earned money to work harder for you rather than staying idle in the bank collecting dust. In order to build wealth, you have to invest because doing so will speed up your wealth building process, allowing you to capitalise on compound interest based on the amount of time you spend doing this.

All of us only have 24-hours a day, regardless of you being an Engineer, Billionaire, Housewife or Student. We have a limited amount of time to work and get paid based on our active income. Without investing, you are just relying on your active income which is in fact capped by a time limit.

In fact, by investing your hard earned income, you are actually duplicating your effort spent at work since you are allowing your hard earned money to work even harder. How is this so?

By investing into stocks, you are investing into an underlying business filled with employees and these employees will try their hardest to generate extra returns for your money even while you sleep. Think of it like outsourcing your effort so instead of just having 24 hours per day, you are able to outsource many more “24-hours” to businesses through the owning of stocks which will in return work harder for your money.

Of course, returns will not be seen immediately so it is important to have long time horizon. This is why starting as early as possible is so important when it comes to building wealth through investing in the stock market.

As to how much to invest, you can start with even $100 by investing using Dollar-Cost-Averaging method via a Robo-Advisor. You can check out my articles here and here to find out more on Robos.

If you are a working professional and have more upfront capital, and have the comfort and luxury of time to invest, you can start your DIY portfolio by buying into ETFs which are automatically diversified in nature. If you can spend the time to research about individual companies, you can also go ahead and buy into individual stocks and it is generally recommended to at least pump $5000 or more per stock so as to minimise trade commissions as much as possible. (For SG stocks)

Likewise, you can also use Robo-Advisors if you really don’t have the time due to your work schedule and commitments. The important part is to start investing as early as possible. Once you’re done with this article, go and open an account now and just start immediately!! (if you have not done so)

Summary

To sum it all up, why the average person have not started investing is because:

  1. Lack of exposure to Financial Literacy
  2. Not knowing how much to invest

By re-conditioning your brain and understanding that investing is not something risky, as your own investing style and portfolio is based on your own personality, risk profile and time horizon.

What works for me may not work for you, just like every different individual, everyone is unique and so does your investments. So the next time you go online asking for other people’s opinion on what to invest in or to justify your investments ,ask yourself these questions first:

  1. What is my time horizon?
  2. So now with this time horizon, how much risk can I take?
  3. With this amount of risk, how do I allocate my capital to maximise returns?

Once you answer these questions, stick to a disciplined, repeatable process and create your own investing principle. The goal here is really consistency and not to be a trend-follower. Avoid market noises and avoid the next big thing. Stick to your original reason why you started and follow-through with it. With enough time and capital, you will only have everything to gain and very little to lose.

Thank you for reading to the end and I really hope you feel more confident to start if you are a beginner and also provide clarity if you are already investing but unsure of what you are doing. If you like this article, do share it among your friends so it can help more people and to re-condition our minds to think like an investor and hopefully retire early by cultivating a healthy personal finance habit and staying invested for the long run.

I use StocksCafe to keep track of all my investments (include Robo) + research on stocks. You can also view my portfolio as well as many others so you can compare your own performance with other investors. If you are interested in signing up, you can use my referral link to sign up and access premium features for 1 extra month for new users. (3 months)

Syfe Equity100 Portfolio Update (July 2020)

Hello readers!

As promised, I will be keeping a record of my Equity100 performance on a monthly basis. As I’ve mentioned before in my previous post, Syfe will become a “managed funds” portion of my entire portfolio. I have a long time horizon with Syfe going forward and will be investing into it for at least 10 years.

Syfe as a Robo Advisor, is also an effective and affordable way for me to invest since I don’t need a huge upfront capital to invest and can just pump in any additional capital into it.

It helps me to diversify into US equities as well as international stocks exposure, which is always a good thing since I get more diversification aside from my DIY portfolio. I started the portfolio on the 5th of July. (Portfolio update around the 5th of the month)

Here’s my monthly Equity100 Summary:

July 2020

Equity 100 Portfolio (As of Aug 4 2020)

Syfe equity100

Total invested amount: $1100

Current Value: $1217.56

Portfolio Return: +10.69%

Total contribution this month: $1100

Fees Paid: $0.30

Thank you readers who used my referral code! Some of the returns thus far are a result of referral bonuses so I’m really grateful for your support and trust in my articles. I will continue to value add and promote platforms I personally use and recommend going forward.

Current Composition (As of Aug 4 2020)

I won’t be too concerned about returns thus far since it’s only been a month since I started this portfolio. I will be contributing regularly to Syfe on a monthly basis with a minimum of $200/month. Hopefully 5-10 years (longer) later, the contributions will pay off in the long run!

Year-to-Date Performance of Equity 100 vs S&P 500, Total World Market and Straits Times Index. (From my StocksCafe)

I use StocksCafe to keep track of all my investments (include Robo) + research on stocks and track my portfolio performance against various indexes as shown above. You can also view my portfolio as well as many others so you can compare your own performance with other investors. If you are interested in signing up, you can use my referral link to sign up and access premium features for 1 extra month for new users. (3 months)

Syfe Promo Code

For people who are interested to invest into Syfe and wants to open an account, you can use the promo code below as a bonus! 🙂

Promo Code: SRPTH8LK3

$10 bonus for the first deposit of $500 (or more)!

$50 bonus for the first deposit of $10,000 (or more)!

$100 bonus for the first deposit to $20,000 (or more)!

Note: Bonus is applicable on the first deposit made only. The bonus will be automatically credited to your portfolio and invested along with your existing investments

Thank you for reading and happy investing!

Syfe VS Stashaway: Which Robo Is Better?

Stashaway and Syfe are 2 of the most popular Robo-advisory platforms that beginner and advanced investors in Singapore can invest in. With a clean user interface, easy to understand investment method and a structured fee structure, it is extremely difficult to compare the 2 head-to-head.

If your starting capital is small, these 2 Robo Advisors have no minimum investment requirements, so you can start with whatever spare cash you have right now.

Many readers and friends wanted me to do this article for quite some time due to popular demand regarding my previous article on Syfe. To begin, Stashaway is a larger, older Robo Advisor in the market since 2017 while Syfe is a newcomer. Despite being a newcomer, Syfe has been rolling out popular portfolios such as the REIT+ and the Equity100 for investors who want an SG-based Income Portfolio which is currently a first in the market as well as a 100% equities portfolio for investors seeking aggressive growth looking for the highest risk-adjusted return in the long run.

With a myriad of portfolios offered by Stashaway, investors are spoilt for choices with the multiple risk indexes offered. Stashaways’ portfolios pretty much adopts a risk-management strategy to investing through the application of “Modern Portfolio Theory” and creating portfolios which can weather a market downturn by investing into different asset classes such as equities, bonds and commodities. This is similar to Syfe’s Global ARI portfolio which also focuses on downside risk management and returns from both Robos should reap similar returns because they have very similar holdings. (based on respective risk indexes) Do note that both Stashaway and Syfe invest into mostly US-based ETFs for their Global Portfolio.

TL;DR

Syfe Promo Code

For people who are interested to invest into Syfe and wants to open an account, you can use the promo code below as a bonus 🙂

Promo Code: SRPTH8LK3

$10 bonus for the first deposit of $500 (or more)!

$50 bonus for the first deposit of $10,000 (or more)!

$100 bonus for the first deposit to $20,000 (or more)!

Note: Bonus is applicable on the first deposit made only. The bonus will be automatically credited to your portfolio and invested along with your existing investments

We will be comparing the Robos based on two factors:

  1. Fees
  2. Performance

1. Fees

When it comes to investing, the amount of fees you pay as a percentage of your investment is really substantial in the long run. 2% of 100k is $2000 and 0.5% of 100k is $500. Are fees significant? Yes. They play a huge role when it comes to overall returns of a portfolio in the long run. Since the fees are recurring, as your capital compounds, so does fees. Therefore, the lower the fees, the better!

So what are the fees structure when it comes to Stashaway and Syfe? Both do not have any minimum capital to start, (meaning you can start with even $100!) but they differ slightly when it comes to their fee structure.

Stashaway

When it comes to Stashaway fees, an investor with less than 25k to invest will find that fees are rather high at 0.8% (not counting in ETF expense ratio.) If you were to count in ETF expense ratio (Average 0.28%), that will bring overall fees to 1.08% of your entire investment.

Unless you are an investor with $100,000 or more to invest into Robo, Stashaway’s overall fees are pretty steep and not really beginner friendly for someone starting out with maybe a $2000 capital. Stashaway is really targeting a different segment of investors with more capital and for people who want flexibility in choosing their risk profiles to capture gains from Higher Risk Portfolios while hedging risk using the Lower Risk Portfolios.

Syfe

When it comes to Syfe, it is obvious that they are more beginner friendly with a straightforward pricing structure:Anything from $1 to $19,999 will be 0.65% (excluding ETF expense ratio) and above 20k will be 0.5% and 0.4% for 100k and above investments. Compare this directly to Stashaway, if you were to hit 0.5% fees from Stashaway (excluding ETF expense ratio), you will need to invest $100k and above to match Syfe.

What this means is that, if you only have a capital of 20k or less to deploy, Syfe is the clear winner when it comes to fees because you are paying lesser fees on a recurring basis which will become really significant in the long run. Fees are the number one reason why most funds underperform.

Two similar funds can have extremely similar holdings (hence returns) but if one fund has a higher management fee, the clear winner is the one with lower fees since annualised returns takes into account the fees that you pay for trade commissions/ management fees.

In conclusion: If you are an investor in their early 20s with less than 100k capital, you are paying lesser fees yearly if you opt for Syfe since you will be incurring 0.65% fees (excluding ETF expense ratio) compared to Stashaway’s 0.8% fees (excluding ETF expense ratio) if you have a small capital.

If you are an investor in their 30s or 40s and beyond and looking for somewhere to invest spare monies of 100k or more, Stashaway may make sense to you since fees will be 0.5% or lower depending on how much capital you have. You can also choose Syfe since their fees drop to 0.4% (excluding ETF expense ratio) when you invest more than 100k and have a dedicated financial advisor who will guide you along the way.

Winner: Syfe (Lower fees = Higher Returns)

2. Performance

One of the key reasons why we choose an investment is due to its performance: Is the investment able to generate you the highest risk adjusted returns based on your own risk profile and time horizon? If yes, you found your right fit and can start to decide on what to invest. We shall now dive into the performance of the 2 Robo Advisors and see which one makes more sense based on your own individual risk profile and time horizon.

Stashaway

The above illustration is adapted from Wei En’s Stashaway Analyser on Seedly where he analysed every single of Stashaway’s global general investing portfolio. As you can see, Stashaway’s portfolios have been outperforming the S&P 500 across the board with the highest return so far being Stashaway Risk Index 36% @11.75% YTD return.

The above also shows the graphical performance of all of Stashaway’s portfolios Year-To-Date (YTD). As you can see, the lower risk portfolios declined lesser compared to higher risk portfolios during the March selloff due to higher allocation of Bonds and Gold. The higher risk portfolios(more equities) eventually recovered though and outperformed the lower risk portfolio so far which can be seen on the graph above.

As a general rule of thumb, the more equities (stocks) you hold in your portfolio, the more volatile (price fluctuations) your portfolio return is going to be. But do note volatility does not equate to risk. A common misconception beginner investors make is to think that a volatile instrument is a risky investment, risk can be defined by many different things but the biggest risk to investing is not knowing what you are doing. Even putting your money in the bank has risk, such as credit risk and inflation risk. So everything in life comes with risks. It’s sad that the only thing certain in life are taxes and death…

Stashaway’s portfolios generally follows a “Modern Portfolio Theory” approach by diversifying into multiple asset classes such as Stocks/Bonds/Commodities and in general these types of portfolio tend to do decently well in any condition. The only caveat here is that returns will neither be the best nor the worst. You will just enjoy a decent risk-adjusted return with downside risk protection from bonds and gold but when markets go up bonds and gold will be weighing down on your potential gains.

In conclusion, Stashaway’s myriad of portfolios offer a decent risk-adjusted return with downside protection and is significantly outperforming the S&P 500 which has a YTD return of 5.42% as of 31 July 2020. The potential cons going forward will depend on how much bonds and gold you have but at the same time the amount of downside you will face potentially also depends on how much equities you have.

Stashaway’s portfolio is designed for busy professionals wanting a lower cost collective investment scheme as compared to higher fees Unit Trusts. The portfolios itself consist of ETFs only though, so returns generally depend on overall market conditions. This Robo is recommended for investors with Low/Balanced/Medium-High Risk Profile with a bigger capital, since the targeted group will be investing into the different portfolios with a short, medium and medium-long term time horizon.

Syfe

When it comes to Syfe, Syfe offers 3 different portfolios targeting different types of investors with different risk profile and time horizon. For one, Syfe’s Global ARI is extremely similar to Stashaway’s portfolio with a focus on downside risk management and tilt towards international ETFs. It can be seen in the above backtest done by Syfe which shows that they have the ability to outperform the index they are tracking.

Syfe offers the industry’s first and only SG REIT based portfolio REIT+ which was extremely popular among Singaporean investors when it first released. It gave an opportunity to Singaporean retail investors to own the top 20 REITs in Singapore without incurring hefty trading fees and upfront capital if they were to do it themselves. In fact, this is the only portfolio which does not invest into ETFs but buy into the actual underlying REIT which you will be able to own directly albeit being a custodian. However, it is still a good way to diversify into the S-REIT market and a good starting Income Portfolio. It generated a return of 27.1% with a dividend yield of 5.1% in 2019. However do note that past return is not a guarantee of future performance so it is still up to you if you choose to invest in this portfolio.

As for Syfe’s newest portfolio Equity100, it changed the entire ball game when it comes to Robo advisory investing: They have opt for a 100% equities (stocks) portfolio targeting investors seeking the most aggressive growth with a long time horizon. This portfolio will outperform any other portfolio offered by Stashaway if you as an investor hold it long enough because equities trend upwards in the long run and absolutely destroy any other asset class over a long time period.

From my StocksCafe portfolio

Based on my own computation of my Equity100 portfolio, it is significantly outperforming the S&P 500 ETF, VT (World) ETF, and absolutely crushing our local STI ETF. (+18.39% VS -19.47%) Year-To-Date. While this computation is backtested since Equity100 was only released in June 2020, this just shows the potential that a fully equity portfolio can offer and I will definitely continue to invest into this portfolio in the long run.

In conclusion: Syfe offers 3 strategic portfolios which caters to different investors or for an investor to craft a powerful Core-Satellite Portfolio to capture higher gains using Equity100 and hedging against downside risk using the Global ARI portfolio as a Core holding. The REIT+ can also compliment the growth segments by providing passive income in the form of dividends.

Based on individual risk profile and time horizon, you can then determine which portfolio to choose. As a general rule of thumb, the younger you are the more risk you should be willing to take due to the long time horizon you have ahead. Hence, Equity100 will become part of my long-term portfolio since it will give me the highest risk-adjusted returns in the long run compared to diversified portfolios holding bonds and gold which may weigh down my potential gains in the long run.

Winner: Depends (Syfe if you are able to stay long term with them/Stashaway if you are a busy professional wanting downside risk and decent risk-adjusted returns with a medium term time horizon.)

Overall Thoughts

So at the end of the day, which Robo advisor you choose really depends on how much capital you have and what kind of investor you are. If you are currently schooling and only have a couple hundred bucks, or less than $25,000 to invest, Syfe makes the most sense given its lower fees (0.65%) compared to Stashaway (0.8%).

Other than fees, an investor can opt for Syfe if you are looking for a 100% equities portfolio through the Equity100 or a 100% S-REITs portfolio through the REIT+. Both of these are unique and the industry’s first, so if you are a young investor that wants to go full equities like me or simply wants to invest in Singapore’s top 20 REITs, Syfe will make the most sense to you.

Likewise, if you are busy professional with little time to care about your finances and investments, wants to have the flexibility in choosing different risk profile while protecting your downside risk, you can opt for Stashaway’s portfolio and customise it whichever way you like and call it a day. Or you can also use a Core-Satellite strategy using Syfe’s Global ARI as a core holding, and then Equity100 and REIT+ as a satellite holding.

This will make sure you have your downsides covered while at the same time enjoying some of the gains from the satellites holding that the Core is not able to attain.

At the end of the day, investing should not be binary and you can opt for both Robos if you want to. You can even use Stashaway’s portfolio as a core holding while Syfe as a satellite holding, it is totally up to you!

All of these comes back to the same questions:

  1. How much capital do you have?
  2. How long is your time horizon?
  3. How much risk are you willing to take?
  4. Are you in a profession whereby there’s simply no time to care about investments?

Once you are able to answer these questions, the right Robo will naturally make sense to you. But the most important thing is to start now and stop procrastinating!

Stashaway Beanstock Rating:

Rating: 4 out of 5.

Syfe Beanstock Rating:

Rating: 4.5 out of 5.

Both Robos have an extremely clean UI and easy to understand platform with great customer support. Both are able to bring back decent returns for their investors and even outperforming the S&P 500 so far. The reason Syfe got a higher Beanstock rating is because it ticks more of my personal checklist of investing but that is because my needs and your needs may be different.

Choose the Robo which can offer you the highest risk-adjusted returns based on your own risk profile, time horizon and capital available. With the capital you have, choose the one that will incur the least fees because fees will really eat into your returns and will be compounded just like your capital. Hence, the Robo you choose should be in line with all the above criteria and you should always stay invested, so remember to pump in spare cash every now and then.

Thank you for reading! I hope you have more clarity on the similarities and differences between Stashaway and Syfe. Both are excellent Robos which allow investors to diversify into Global ETFs without incurring hefty trading fees and require no minimum investment capital to start. So which one did you choose? Leave your comment down below! Stay safe and stay invested!

Oh yes, Syfe Promo Code for those who wanted to scroll back and find it, here it is for your convenience 🙂

Promo Code: SRPTH8LK3

$10 bonus for the first deposit of $500 (or more)!

$50 bonus for the first deposit of $10,000 (or more)!

$100 bonus for the first deposit to $20,000 (or more)!

Disclaimer:

The content here is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security. In fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment.

Do note that this is not financial advice. If you are in doubt as to the action you should take, please consult your stock broker or financial advisor.

Financial Freedom: What is it and how to attain it?

What is Financial Freedom?

Financial freedom in short, is the point where your passive income outside of your job (active income) equals to or exceeds your cost of living. This ‘extra’ income, derived from other sources outside of your job, supports your expenses allowing you to not have to actively work anymore.

Our parent’s generation grew up in an environment with higher interest rates, meaning: bank interest rates were high back then which naturally means many people did not invest and were happy with 5%-6% from the banks back in the 80s. Some who speculated due to limited knowledge cursed the stock market and swear to never touch it again.

With more financial literacy these days, we are getting more informed about the differences between investing and speculating, which is an important stepping stone to building a sound investing principle and sticking to a consistent plan and work towards early retirement.

Do you want to retire at age 40? Or work your ass off till age 65? It is totally up to you. But for the latter, you can actually stop reading this blog post now, unless you are willing to change your mindset.

To achieve financial freedom, you must be disciplined. Let me emphasise: You Must Be Disciplined. It takes time to save money, invest it, and let your invested money earn interest and compounded returns that grow it larger and larger. Consistently saving money, reducing debt, investing, and living within your means can help you achieve financial freedom much quicker.

Many people know of this concept, but few actually knows about doing it. Do you even know what is the amount needed to attain financial freedom in Singapore?

$1.9 million.

Assuming you retire at age 50 and live till 80 years old (30 years of Post-Retirement life). You keep your expenses low, assuming $1000/month with a passive income of $2000/month to enjoy life. In total you will need a whopping S$1.9 Million (inflation-adjusted) just to retire.

Ask yourself how much you have in your bank right now and how long it’s gonna take to hit this number.

How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.

Robert G. Allen

Though investing in a savings account is a sure bet, your gains will be minimal given the extremely low-interest rates. But don’t forgo one completely. A savings account is a reliable place for an emergency fund, whereas a market investment is not.

If you don’t change your mindset now and tell yourself that putting money in the bank will guarantee your savings and you don’t mind inflation eating away your hard earned cash, stop reading and go back to your old habits.

The things I’m about to say are not rocket science but simple math. If you’re always wondering why your bank account value is stagnant months after months then something is wrong with your spending habit. It is time for a financial health check and see if you are overspending.

How to attain it?

Step 1: Determine your retirement goal

What are your goals for retirement? Own 2 properties? Attain a 2 million capital investment? Buy a house in Hawaii and retire there? Travel the world? Own a new sports car? You name it.

The important question here is at what age do you want to retire. Retirement planning starts with setting goals you want to achieve one day down the road and realizing that your desired lifestyle can come true.

Once you determine it, you can then move on to the next step.

Step 2: Determine your cost of living and lifestyle

Do you want to stay in a big bungalow with a huge pool and 3 lifts? Or just want a 4-room condo while having enough to go by without ever working again, it is totally up to you to decide. The general rule of thumb is that the more luxurious the lifestyle, the more your cost of living and hence the more you need from your retirement nest egg.

Some of the general living expenses in life are:

  1. Mortgage Payments
  2. Property Insurance
  3. Property Tax
  4. Utilities
  5. Car(s) Payments
  6. Car(s) Fuel
  7. Car(s) Insurance
  8. Car(s) Maintenance
  9. Internet Service
  10. Groceries
  11. Health Care & Insurance
  12. Dental & Medical Expenses
  13. Clothes & Apparel
  14. Vacation & Travel

The list is non-exhaustive and may include more things and it depends on an individual’s lifestyle.

Once you determine this amount you can then see your annual expenditure. For example, let’s say my expenditure during post-retirement is $8000 per month, hence my annual expenditure will be $96,000. Once you get a rough gauge of your annual cost of living (annual expenditure), you can now move on to the next step.

Step 3: Determine your retirement nest egg

So, how much money do you need exactly to sustain your cost of living post-retirement?

The general rule of thumb is to take your annual expenditure and multiply this amount by 25 times.

So based on the example in Step 2, this will be the amount needed:

$96,000 X 25 = $2.4 Million (Retirement Nest Egg Needed)

25 is a safe number because it can be straight cash that lasts you for 25 years in retirement before running dry.

4% Rule

The better way though is to assume you have your retirement savings diversified in low risk investments that earn you 4% a year. If you want that 4% interest to cover your cost of living and not have to pull from your investment account to fund expenditures then you need 25 times your cost of living as shown in the math example below if using 4% because of inverse relationships (1/25 = 4%).

  1. $96,000 per year lifestyle = 4% interest x  Nest Egg
  2. $96,000 / 4% = $2,400,000 needed in Nest Egg
  3. $2,400,000 / $96,000 = 25 times cost of living

You can decide how risky you want to be late in your life once you’ve amassed a lot of money but for those of you who want safer 4-5% returns on your money each year then shoot for multiplying your cost of living by 25 to get your nest egg total need.

Step 4: Amount needed to invest (from annual savings)

Now that you have the amount of money you need for your nest egg, in this case, $2.4 million, you need to determine how much you need to be saving now to reach your goal. The more you save and invest (wisely), the faster you hit your goal.

How many years do you have until your retirement age goal?

This is when age comes into play and also your TIME HORIZON for investing. For a 20 years-old, if you plan to retire by 40 years old, you have a 20 years time horizon, likewise if you plan to retire by 50 years old, you have a 30 years time horizon and so on.

The general rule of thumb is, the younger you are, the more risk you should be willing to take since you are going to stay invested for decades.

  1. High Risk/Growth = 8% to 12%> (Good choice for Younger People)
  2. Medium Risk/Growth = 6% to 7% (Historical Avg. Return of the Stock Market)
  3. Lower Risk/Growth = 3% to 5% (Keeps inline or ahead of inflation)

You can refer to my post on how to invest your first $10,000 here and get a general idea of how you can go about investing based on your own risk profile and time horizon.

If you can ignore all the short term market noises talking about “Market crash is coming”, “this is the end for stocks”, “Gold is outperforming”, “Tech stocks are booming”, “Bubble is forming” etc and just focus on investing consistently for a long time, you will definitely gain because it is a fact that stocks trend upwards in the long run.

The reason why stocks trend upwards in the long run is because behind these stocks, are real businesses which are growing and you are interacting with these companies on a daily basis. The phone you are using now, the food you are eating, the data you are consuming, the shirt you are wearing etc, are all part of businesses and these businesses will keep growing in the long run.

By owning stocks, you are owning a part of these companies and instead of leaving your money in a bank only to be robbed by inflation, invest the extra money and let these businesses work harder for your money. The key here is to let your money work harder for you instead of you working hard for the money.

All of us have 24 hours each day which means we have a limited amount of time to earn money. By investing you are letting other people (businesses) to work harder for your money! Meaning even when you’re sleeping, your money is being put to work and helping you generate returns higher than anything you can ever find out there.

The caveat here is that compounding takes time and it may seem disappointing in the first year or two. Give it enough time and the results will show, whatever price the stocks are now, it will only get higher but that is provided you identify the right companies and you hold them for the long term.

The opportunity cost of not investing early

Once you understand this concept, we now see that Time, Amount Invested and Return all affect how much you can have in your retirement nest egg. You can control the amount you save and invest for sure but time will be determined by your current age and interest rate is a result of the investment choices you make based on your research or consulting a financial advisor.

In the short run, the stock market is a voting machine but in the long run, the stock market is a weighing machine.

Benjamin Graham

Time may be the most important factor of them all. If you start saving and investing early in life you can have a large nest egg by retirement due to the power of compounding interest. Or you can retire early once you’ve reached the point your investment income replaces your job income plus a healthy margin of income left over in case of emergency that can keep compounding.

If you are already in the later stages of your life when you start taking retirement investing seriously then you’ll most likely have to contribute larger savings each year to catch up what you’ve missed in interest gains. This can place a strain on your budget as you may not have a lot of room to save large amounts of money due to your lifestyle spending habits.

So if you plan to start saving for retirement later in life, expect lower returns because you won’t want to be high risk at a late stage in life. This means you have to save a lot more to invest each year because time and interest are against you at this point making it difficult to achieve lofty retirement goals.

To help you understand why you need to start now, not yesterday not tomorrow or next week, but NOW, read here.

Step 5: Keep track of your current savings and stick to your goal

Now that you have figured out how much you need to start saving to invest each year, it’s time to compare this dollar figure with what you’re actually saving per year currently.

If you need to save $300 per month for example, but is only $200, then you need to either increase your income or reduce your spending. The best case scenario is to reduce your spending while increasing your income so you widen the amount of money you have as savings which can then be used to invest.

Income-Spending = Savings =Capital to Invest

By having a framework when it comes to retirement planning, you can prevent yourself from compulsive buying or excessive shopping which can drastically reduce your savings and your investing capital. Instead of buying bubble tea every day, opt for plain water and instead of taking Grab, opt for Public Transport etc.

Other than reducing your spending, your next choice will be to increase income by starting your passive income which can be from many many things. For me personally, my passive income comes from Royalties (stock photos), Dividends (from stocks) and also from affiliate marketing via my IG. (not consistent) These ‘extra income’ I get will automatically be reinvested either into my DIY portfolio warchest or my Robo portfolio.

Treat investing as a form of forced savings so you will be working towards your goal instead of using up the money on unnecessary things such as eating at an expensive restaurant or clubbing and drinking every single week for example.

My goal is to hit 100K invested capital by the age of 26/27/28 and that will be a crucial milestone for any investor since 100k is the sweet spot when compound interest will get really significant. (10% of 100K is $10,000!)

Thank you for reading my article on how you can attain financial freedom and how you can achieve your goal of retirement hopefully earlier in life. If you wish to find out more investing and how you can start, you can read my article here and passive investing strategies if you have no time to research or read up on your own here.

I wish you all the best in your investing journey and hopefully one day, we can all retire early and enjoy the retirement nest egg of our desired lifestyle. If you have any queries, you can contact me at investingbeanstock@gmail.com or simply send me a message here.

Syfe: Are they worth investing?

I have been receiving a lot of feedbacks from friends and readers about Syfe as a long-term investment. The popularity of Robo-advisory these days are really steering the bulk of beginner investors to pump in capital and adopt a “dollar-cost-averaging” approach to investing.

TL;DR Syfe Promo Code

For people who are interested to invest into Syfe and wants to open an account, you can use the promo code below as a bonus 🙂

Promo Code: SRPTH8LK3

$10 bonus for the first deposit of $500 (or more)!

$50 bonus for the first deposit of $10,000 (or more)!

$100 bonus for the first deposit to $20,000 (or more)!

Note: Bonus is applicable on the first deposit made only. The bonus will be automatically credited to your portfolio and invested along with your existing investments

When I first started investing, the only Robo-advisor back then were Bank-based Robo-advisor such as DBS digiportfolio and then newcomer Stashaway. Fast forward to today, we have a wide array of Robo-advisors to choose from. Spoilt for choices, which one will give us the highest return for the lowest cost? Well, for me, if Syfe was available back then when I first started, I would have chosen Syfe without a doubt instead of investing into STI ETF (ES3) which I am still holding at a loss today. Let me substantiate.

Fees

Source: New Academy of Finance

Now, let’s not be confused by the % stated on the diagram above. It should not be compared to like apples to apples due to the difference in fee structure of the various Robo-Advisory platforms.

Syfe’s fee structure may not look competitive on the diagram above, but note that for a investor with small capital, you will most likely be paying the highest percentage when it comes to fees and that is not counting the expense ratio of the ETFs that the Robos adopt.

Syfe offers a 3-tier payment structure.

Based on the above table, we see that Syfe’s fees are actually the lowest as it is easy to hit the target. If you can hit an investment amount of $20,000, you can enjoy a fee of 0.5%. This is very attainable. If you were to compare to other Robo, say Stashaway, you will have to invest more than $25,000 and your fee will reduce from 0.8% to 0.7% only. Conclusion: If you have $20,000 or less to invest, Syfe is one of the cheapest out there.

Portfolios

Syfe currently offers 3 different portfolios, including the Equity100 which I covered here.

  1. Syfe Global ARI Portfolio
  2. Syfe REIT+ Portfolio
  3. Syfe Equity100 Portfolio

Without going into the details, here’s the gist of the 3 different portfolios:

1.Global ARI Portfolio is a risk-managed portfolio with a focus on protecting downside risk up to a maximum of 25%. It invest into globally diversified ETFs across different asset classes and follows a Modern Portfolio Theory-like approach. This is basically an all-weather portfolio option for balanced risk profile individuals.

2.REIT+ portfolio is a popular portfolio focusing on investing into S-REITs. It directly invests into the underlying REITs and are not ETFs like the Global ARI and Equity100. The returns from this portfolio will be close to the iEdge S-REIT 20 Index it is designed to track. This is basically an income portfolio option for investors looking for REIT exposure or without the need to research into the wide array of REITs available.

3.Equity100 Portfolio is an aggressive growth portfolio with a focus on capital appreciation for the long term. It invest into mainly US-based ETFs with a tilt towards Large-Cap Technology companies and a diversified portfolio of ETFs totalling up to approximately 1500 different stocks. This is basically an aggressive portfolio designed for investors looking for the highest risk-adjusted return in the long run.

For me personally, the Equity100 portfolio made a lot of sense to me given the fact that I will not have any liabilities for the next 4 years (Studying) and will be allocating my spare funds for investing. My investment horizon is more than 20 years. It is the best way for investors with a small capital to start investing, because DIY investing will incur too much fees (at least $10 per trade) while Robo-advisor fees are less than $1 per month but this depends on how much capital you put in to invest.

Viability

Ask yourself, how often do retail investors like you and me beat the index? To be honest, no matter how good an investor is at trading or at stock picking, without the insider information that stock analysts and institutional investors have, it is extremely difficult for an average Joe to even match the market return. (Around 7% annualised)

If you are able to stock pick and achieve 10% returns annualised every year, you can launch your own fund and I’ll gladly invest in it 🙂

Syfe is actually outperforming major indices S&P 500 by a far margin here. It is also generating a return higher than a World-based ETF like Vanguard Total World Stock Index (VT). STI ETF on the other hand, being as disappointing as ever, returning -15.81% Year-to-Date.

The above is computed on StocksCafe where I keep track of all my investments (include Robo) + research on stocks. You can also view my portfolio there as well as many others so you can compare your own performance with other investors. If you are interested in signing up, you can use my referral link to sign up and access premium features for 1 extra month for new users! (3 months)

If Syfe can generate 8% annualised returns in the long run or more using a Passive ETF approach, while you as an investor sit back, relax and just contribute into Syfe consistently, it is really a huge bang for your buck since you can focus on doing things you love while your hard-earned money continues to grow. Where else can you find such good deals in life?

Proxy Professionally Managed Portfolio

When you managed to pick a winner, DIY investing will be the most rewarding experience ever. After that you will start to believe you have the Midas touch but that is when some stocks start to underperform and you keep thinking what’s wrong. I am a victim of this and that is why I am diversifying into Syfe so that at least I have a professionally managed portfolio within my investments.

This is not a sponsored post and purely my own personal experience and opinion when using Syfe.

But in essence:

  1. Relatively low fees of 0.4% to 0.65%
  2. Investing Principle is sound
  3. Investment team is full of insights and professional experience
  4. Offers different portfolios to suit different needs
  5. Potential to outperform the market using a passive approach (Equity100)
  6. Clear fee structure and easy to use interface

I recently took profits from my Global ARI portfolio in June and redeployed the capital when Equity100 came out. I did not invest into it fully because of how much US equities have recovered and are in unhealthy, overvalued territory. Many even believe that an economic bubble is forming and an eminent 2001-like crash is coming.

My Equity100 Portfolio as of 23 July 2020. (Started on 5th July)

Whether or not there is a crash, it always pays to stay invested. I invested $700 for a start in July and will be doing a monthly update going forward. My strategy now would be to put in at least $200 every month cautiously until eventually if there is a crash, I will be deploying a larger capital to average down and hold for the long term.

Thank you for reading and hopefully I managed to shed some light about what Syfe is and hopefully, you can start investing and attain financial freedom at an earlier age 🙂

Once again if you are looking to sign up for Syfe, here is the referral code for you: SRPTH8LK3

Simply deposit $500 when you create your account and use the referral code and you will receive a $10 bonus which will become part of your investment 🙂

All the best!

Is Tencent Holdings (NYSE: TCEHY) Undervalued?

What is Tencent Holdings?

Founded in 1998 by Pony Ma, Tencent Holdings is the world’s largest video game company and the largest multinational conglomerate holding company in Asia. It is among the world’s top technology company with huge stakes in other firms such as JD.com, Tesla, Snap, Meituan Dianping and many more. Its businesses provides Value-Added services (VAS). The company operates through VAS, FinTech and Business Services, Online Advertising, and Other segments.

In short, Tencent has a broad-based and diversified business model focusing on some of the future technological trends with a large consumer base.

Throughout 2018, Chinese stocks were under pressure due to the trade war escalation between US and China. Tencent was hard hit by the Covid-10 Crash but has since then appreciated to levels higher than Pre-Covid. The reason why Tencent was able to appreciate amid the current pandemic, is due to the spike in demand for online games, WeChat social media and video streaming businesses. These business segments were able to offset some of the weaknesses in its payment services and the cloud due to Covid-19. In fact, Tencent reported a solid quarter 1 result while other companies were reporting a fall in profits.

As of July 22

I bought Tencent Holdings at the entry price of 67.66 USD and I have a few reasons why I believe Tencent is below it’s fair value and have much greater room to grow.

Strategic Reorganisation of its Business

Tencent is transforming from consumer Internet to industrial Internet. CEO Pony Ma believes the future of the Internet is using artificial intelligence to process Big Data in the cloud, allowing industries to aggregate and unlock value in their data. Tencent aims to help industries to connect to consumers through its platforms such as WeChat, which has over 1 billion users! That is 1/7 of the world’s population using Tencent Services right there. This shows the wide moat that Tencent has, due to it’s substantial network effect.

Tencent also has a strong position in social networking and entertainment (such as gaming, online video, and online music) and is advancing into finance, government, smart retail, and industrial verticals. This transformation will take time, particularly since Tencent has been more of a consumer-facing company in the past.

With more focus on its cloud and advertising business, it will be able to integrate its different divisions together to provide more value for clients and provide more unified insights into its user base across all of Tencent’s social and media products.

Source: Anne Zhou

Monopoly Status of social media

As of first quarter 2020, monthly active users for WeChat and QQ reached 1.1 billion and 823 million, respectively, compared with China’s population of 1.4 billion. Now if that is not a monopoly, I don’t know what is.

As of June 2020, the WeChat app ranked first in China in terms of monthly active users on Android phones and iPhones combined, while QQ ranked third, according to Analysys. Tencent’s adjusted return on invested capital has significantly exceeded its weighted average cost of capital for the past 10 years. Online gaming, subscriptions, advertising, and payment will also be the key drivers of growth for Tencent’s business.

As more users start to adopt WeChat and QQ, the value of Tencent’s network will continue to grow exponentially, as more mini apps and programs will choose to adopt these platforms for their businesses. With increasing digital penetration around the world, this will be an uptrend if Tencent is able to capitalise on emerging markets and provide value for such economies.

Tencent’s investment into US gaming industry

Source: Google Images

Tencent’s online-gaming-related IP is from in-house development and acquisitions. For PC client games, Tencent owns the global top PC client game in terms of revenue, League of Legends, through full acquisition of Riot Games. In 2016, Tencent acquired the top global mobile game company, Supercell, which owns the top mobile game, Clash of Clans (released in 2012). In the past 10 years, Tencent has been investing in top online gaming studios globally. Besides the two mentioned above, Tencent also invested in Epic Games, Activision Blizzard, Glu Mobile, and Pocket Gems in the U.S. as well as about 10 online gaming companies in South Korea.

High growth potential

The shift towards FinTech and Cloud segment is sure to help boost Tencent’s revenue in the long run as they expand loan and wealth-management products, higher contribution from commercial payments, cloud customers, higher spending per cloud customer, expansion in the product portfolio in cloud, and the provision of artificial intelligence-enabled cloud services.

Source: Seeking Alpha

Without going into the technicals, I used a valuation model based on weighted average cost of capital of 9.7%. Based on this calculation, Tencent will be able to grow 15% year-on-year for the next 10 years.

In the last quarter, Tencent’s revenue grew 26% and its adjusted operating profit increased 25%, with adjusted net profit rising 29%. Adjusted free cash flow increased by 133% too, which help boost Tencent’s balance sheet.

The fact that Tencent was able to grow revenue at 26% even in a quarter where China’s GDP contracted by 6.8% due to COVID-19, is a testament to Tencent’s resilient business model and cash flow generation.  Thus, it seems Tencent may be more deserving of higher price gains and even further growth potential.

The reason why I chose Tencent Holdings as an investment is also to diversify away from US tech stocks, and allow me to get exposure into China. Moving forward, I will continue to monitor the Chinese Tech scene as well as companies on my personal watchlist.

Risks

Tencent has its own fair share of risk which includes:

  1. Risk of US-China Tensions
  2. Risk of US Stock Exchange Delisting
  3. Pandemic Risk
  4. Stiff competition with Alibaba
  5. Risk of disruption
  6. Struggling economy may reduce revenue inflow and profit margin

While there may be more risk involved, I believe that the upside outweighs the downside by a far margin and that the business is currently undervalued, I have done my own due diligence while researching this company with further analysis not covered in this article. I will be holding Tencent for the long term and will be looking to average down should the stock market collapse.

Disclaimer: 

The content here is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security. In fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment.

Do note that this is not financial advice. If you are in doubt as to the action you should take, please consult your stock broker or financial advisor.

At the point of writing, I am a shareholder of Tencent Holdings. Due diligence is required.

Why You MUST Invest As Early As Possible And Stop Procrastinating

Question: Do you sometimes procrastinate and know what you’re supposed to do but just can’t get yourself to do what’s necessary? Or you are simply not motivated and driven enough to do something?

How do we cultivate and add a sense of urgency to our lives? (and our finances?)

I know, we are in our 20s, our prime years of enjoying life, we are carefree individuals with not much liabilities and we have a roof on our heads. We go drinking with our friends, playing computer games and going out shopping and eating good food. We got all the time in the world and have nothing to worry about.

But as we get older we realise that we have a finite amount of time left on this Earth. Before you get to this realisation and start regretting why you didn’t do things earlier, start now.

How to start?

Starting is always the hardest. But to add that urgency in our lives, imagine this.

Every jelly bean represents 1 year of our lives. The average life span of a human being is 80 years. So all of us have 80 jelly beans to work with.

On average, we spend 26 years worth of time just sleeping!

If we take away the time we used just to sleep, we only have 54 jelly beans left. What is even more shocking, is that humans on average, spend another 7 years worth of time trying to fall asleep! So essentially, we have 47 jellybeans left.

We spend 11 years of our lives watching tv, browsing the internet and social media.

Our phones are with us the whole time, right now you are probably reading this from your mobile phone or tablet. Due to the high level of digital penetration, we spend so much time on the internet that we don’t even realise. And now, we have 36 jelly beans left.

Another 5 years of time are spent eating and drinking. Taking the entire time you spent studying in school as well, we have essentially 25 jelly beans left..

We take another 1 year worth of time dating, and another 1 year worth of time working out. Not forgetting the time we take to commute to go to school and work, that is another 1 year worth of time! So in essence, we are left with 22 jelly beans.

We are almost done but not yet!

Let’s say you want to attain mastery of a craft, and learn up a soft/hard skill for you to climb the corporate ladder, do you know that on average, it takes 7-10 years to become a master in your chosen field?

12 Jelly Beans Left

We have 12 jellybeans (years) to create the life that we want, to build relationships and build the exceptional lifestyle that we want. Does that look like many years to you?

The above is assuming you don’t make lots of mistakes! If you decide not to act on it and waste your time even further, then you will have less than 12 jellybeans to work with to reach your goal. Without proper guidance/mentors and getting into debt, (e.g student loans/mortgage loans/car downpayment) you take even longer to bounce back and Voila! You have no jelly beans left.

What are you going to STOP doing to waste time?

Now that I have put things into perspective, what is it truly stopping you from starting?

Common Excuses are:

  1. No money
  2. No time
  3. Lazy
  4. Not interested
  5. Too tedious
  6. It’s a scam
  7. I’ll start when I get more money
  8. I don’t take risks

The reason why these excuses are said, is due to the lack of understanding of the big picture.

Source: BedelFinancial

The earlier you start, the earlier you get to reap the benefits of compound interest with a significantly bigger nest egg. The illustration above is self explanatory. But in essence, every 10 years delay you take to start, you are losing a whopping $90,000 to $400,000, depending on when you start. If you still choose to procrastinate, I really can’t help you anymore. Conclusion: START NOW!

You can get started with even $100

By putting aside a small amount to invest consistently such as through a Robo Advisor, you can get diversified and stay invested. And hopefully retire early and enjoy longer retirement life instead of working your ass off when you’re in your 50s and 60s.

If you wish to find out more about starting out as early as possible, I wrote an article about Syfe’s Equity100 portfolio here and passive investing strategy that beginners can adopt here.

For beginners with $10,000 saved or more and not knowing how and where to start, you can check out my article here.

TL;DR Syfe Promo Code

For people who are interested to invest into Syfe and wants to open an account, you can use the promo code below as a bonus 🙂

Promo Code: SRPTH8LK3

$10 bonus for the first deposit of $500 (or more)!

$50 bonus for the first deposit of $10,000 (or more)!

$100 bonus for the first deposit to $20,000 (or more)!

Note: Bonus is applicable on the first deposit made only. The bonus will be automatically credited to your portfolio and invested along with your existing investments

Thank you for reading. I hope I have put things into perspective and why you should invest as early as possible.

Also, if you are interested to sign up StocksCafe, a one stop platform for you to track all your portfolios in one place, click the link here to sign up. You will enjoy an extra month of paid features!(3 months in total) Also, basic features are completely free for all users 🙂 (Yay!)

How to invest your first $10,000

Now that bank interest rates are at an all time low, you may be wondering “Hmm, where else can I put my savings to work instead of letting it collect dust in the bank?”

You ponder and search online for answers, only to be confused by the vast amount of suggestions; “set up emergency fund”, “Get a 70/30 Stock Bond Mix”, “Buy ETF”, “Put in Singlife 2.5%”, “Buy ILP!”, “Put them into Tesla Stock confirm huat”, “Bro just do Options, I just profited 20k”, “Invest in REITs”. While the above methods do give you an idea about putting your cash into better use, each method has it’s own Pros and Cons+ Risk that you have to consider very carefully.

And now you’re here reading my blog, trying to figure out how to put your first $10,000 to generate higher returns, to counter inflation so that your money retains its value or even better. Before you scroll down, I want you to ask yourself 3 things:

  1. What is your spending habits like?/What liabilities do I have?
  2. How long do you want this investment to be? 2 years? 5 years? 20 years?
  3. Have I set aside a 6 months emergency fund?
Source: Chirag Investment

The next thing you need to understand is the trillema between risk, return and liquidity. The diagram above is pretty self explanatory. But to sum it up, if you are willing to forgo lower risk, you will be able to reap higher return, vice-versa.

Now that you answered those questions, I’ll share with you what I will personally do with the first $10,000 investment.

Disclaimer:

The content here is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security. In fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment.

Do note that this is not financial advice. If you are in doubt as to the action you should take, please consult your stock broker or financial advisor.

Think of the Purpose

What is the purpose of this $10,000? There are many different ways you can invest or save for the future.

Source: Euro-Phoenix

If you see different asset classes under a spectrum, risk and returns can range from ultra safe bank deposits to speculative investments such as Cryptocurrencies and Derivatives (eg Options/Futures/Swaps)

In the investment world, the possibilities are endless when it comes to what you can invest in. It is this dynamism that makes the financial markets a vibrant and thriving ecosystem.

So what is the end goal here? In investing, our goal is to invest consistently with a proven strategy that grows your wealth in the long run. Doing so allows your hard earned money to work even harder for you.(Even when you’re asleep)

Investment Returns are derived from 2 sources. They are:

  1. Capital Gains (by selling the stock)
  2. Dividends (by holding the stock)

People invest either for Income(Dividends) or for Growth (Capital Gains) or Both. One needs to understand the difference before getting into investing as different stocks/sector/market have their own unique characteristics.

For instance, the Singapore Market is mainly for Dividend investing due to the excellent Bank and REIT stocks having attractive yields of 5% or more with solid fundamentals. However, Singapore stocks have limited growth potential due to our limited size. As for capital gains(while possible), it is generally not as attractive if you compare to the US Market.

The US Market on the other hand, is mainly for Growth investing due to the size of their consumer market. With many big conglomerates and technology companies with international branding, the US market is filled with growth opportunities and one can easily earn more than 100% capital gains if you remain vested in the US markets. (in the long run)

Once you understand the difference, we can now move on and talk about the different options available based on different individual preferences.

TL;DR Syfe Promo Code

For people who are interested to invest into Syfe and wants to open an account, you can use the promo code below as a bonus 🙂

Promo Code: SRPTH8LK3

$10 bonus for the first deposit of $500 (or more)!

$50 bonus for the first deposit of $10,000 (or more)!

$100 bonus for the first deposit to $20,000 (or more)!

Note: Bonus is applicable on the first deposit made only. The bonus will be automatically credited to your portfolio and invested along with your existing investments

1. For Conservative Individuals

If you are someone who is generally risk-averse, and can forgo higher returns for the sake of safety and liquidity, this portfolio is something that can be considered:

Singapore Exposure Portion (60%)

  1. Robo Advisors: Syfe REIT+ (Risk Managed)-$2000
  2. STI ETF(ES3) via DBS Vickers CashUpfront -$2500
  3. SingLife 2.5% (Warchest to deploy) -$1500

International Exposure Portion (40%)

Kudos to the Seedly Contributor who shared this with me! (Stashaway Returns as of July 2020)
  1. Robo Advisors: Stashaway Risk Index 12%-18% -$2000
  2. Robo Advisors: Syfe Global ARI Portfolio (20%) -$2000

Reasoning

This portfolio offers a diversified equity/bond mix based on a balanced portfolio and allows you to get into both International Market and Singapore Market Exposure.(60/40) Any time the market crashes, you can start to deploy the Warchest in SingLife2.5% to average down on your investments. Of course this is not rocket science and you can tweak this portfolio at any point in time based on your preference and personality. This portfolio is purely for your reference and not a recommendation per se.

The reason why I chose Roboadvisors is because with a small amount of capital to deploy, transaction fees are pretty significant if it comes to DIY investing. Roboadvisors allows you to diversify without much effort and winding up huge transaction fees. The caveat is when your portfolio gets bigger next time (eg >100k), you probably should switch to DIY since Roboadvisor fees will start to eat into returns due to the recurring nature of fees.

*Bonds were not recommended due to their measly returns now. You can also check out my article on why bonds may be unnecessary if you are a young investor in your 20s.

2. For Individuals with Higher Risk Appetite

As a young investor with a long time horizon ahead, I fall under this category. If you are like me, able to take on higher risks and take on higher market volatility and short term price fluctuations in hopes of higher risk-adjusted return in the long run (eg 10% or more), this is a portfolio I will personally adopt if I were to start investing again with $10,000:

Singapore Exposure Portion (10%)

  1. Roboadvisor: Syfe REIT+ (100% S-REITs) – $1000

International Exposure Portion (90%)

  1. Roboadvisor: Syfe Equity100 (100% Equities ETF) -$4000
  2. Growth Stocks via Research (Visa, TSMC, Apple, Berkshire-B) -$3000
  3. Chinese Growth Stocks via Research (Tencent, Alibaba, JD.com) -$2000

Reasoning

This portfolio focuses on aggressive growth with 100% exposure to equities (Stocks) for an investor with a longer term time horizon(>10 years). In the short run, this portfolio will definitely fluctuate due to the nature of the asset class involved but will also provide the highest risk-adjusted returns due to stocks outperformance in the long run.

Source: Google Images

As you can see from the graph, no other asset class came close to beating stocks in the long run. Therefore, if you are ready to invest for the long term and don’t mind short term market fluctuations, going 100% equities is the best way to achieve the highest risk-adjusted returns for retirement.

The reason why so much emphasis is placed on International Market exposure rather than Singapore is due to the different characteristics of the markets mentioned at the beginning of the article. This is a portfolio I will personally adopt but may not be suitable for an investor who do not know fundamental analysis. The individual stocks portion is an allocation whereby I do my due diligence in understanding the business, their balance sheet, income statements and cashflow statement and determine if they are suitable for long term investing.

Individual stocks also require a more active approach to investing since you need to constantly monitor the market to see if the growth story remains throughout the years you invest. The portfolio above can be tweaked and even include ETFs if you prefer more diversification or simply do not know how to value a company using fundamental analysis.

3. For low maintenance investors with higher risk appetite

If you feel uncomfortable owning individual stocks or a more active approach to investing, but still wants to enjoy higher risk-adjusted returns in the long run, you can consider this portfolio instead:

Singapore Exposure Portion (20%)

  1. Roboadvisor: Syfe REIT+ (100% S-REITs) -$2000

International Exposure Portion (80%)

  1. Roboadvisor: Syfe Equity100 (100% Equities ETF) -$4000
  2. Roboadvisor: Endowus-Dimensional World Equity Fund -$4000

Reasoning

This is a full equities Roboadvisor portfolio! This means that as an investor you are putting in the least effort. All you need to do is pump the money into the roboadvisor and just call it a day. Dollar cost average consistently and withdraw the money near retirement. This is a complete passive approach to investing and will be suitable for busy individuals who have little time to learn about investing.

The only component that’s different compared to the other aggressive portfolio above is Endowus’ Dimensional World Equity Fund. The reason why I chose this is because Dimensional Funds are traditionally only offered for institutional investors with a minimum capital of $100k to start. It uses a Factor-Based Investing approach just like Syfe Equity100 but using completely different factors. You can read up more about it here.

If I were lazy or if I were to get busy in my career next time, I will gladly adopt this portfolio since it is easy to use, low effort and can provide me with higher risk-adjusted returns (in the long run) without me doing the ‘homework’ myself.

That’s it!

This pretty much sums up what I will do if I were to invest my first $10,000 again. In investing, it is important to understand that just like how every individual is unique and different, so does investing style and portfolio allocation. If you are a risk-averse individual, stick to a lower-risk portfolio, if you are able to take on more risk with a long term view, go for a more aggressive portfolio. At the end of the day, there are no right or wrong when it comes to investing, as long as you stick to your convictions and stay invested, you are bound to reap the fruits of your labour if you give it enough time to compound.

Rule No. 1: Never lose money. Rule No.2: Never forget Rule No. 1

Warren Buffett

Thank you for reading. I hope this allow you to see the possible things that you can do with $10,000 and it is totally up to you to allocate. As long as it is a sensible strategy, it will help you to hit your goals faster!

Also, if you are interested to sign up StocksCafe, a one stop platform for you to track all your portfolios in one place, click the link here to sign up. You will enjoy an extra month of paid features!(3 months in total) Also, basic features are completely free for all users 🙂 (Yay!)

Final Disclaimer: 

The content here is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security. In fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment.

Do note that this is not financial advice. If you are in doubt as to the action you should take, please consult your stock broker or financial advisor.

The Truth About Investing And How You Can Start: Part 1

To many people, it may seem daunting when you first hear the word “Investment“. To a complete newbie, investing can be a rather unexplored and unknown realm since it is not taught in general education. It requires significant knowledge of financial jargons/investing principles and lots and lots of hard work and emotional discipline.

Beginners are also filled with fear and confusion when it comes to investing. Why is that so? Here are 3 common reasons why beginners are not investing/afraid to start.

Reason 1: Lack of understanding

Beginners usually associate investing with buying stocks and selling them in the same day (Trading) or looking at candlesticks and complicated technical indicators while looking at 4 computer screens of numbers, stock tickers and jargons. Sound familiar?

The normal layman view investing as something that only the Rich can do and involves lots of technical skills, deep understanding of economics, being dramatic like Wall Street and playing with derivatives like Options and Futures and leveraging/playing on margin. I even have friends asking me if investing in Cryptocurrencies is a good idea.

Without proper understanding of what investing is all about, the beginner is doomed to fail if he/she were to enter the stock market with these misconceptions. Investing requires an individual to have an investor’s mindset, understanding risk appetite, time horizon and the goal of the investment. Without understanding these fundamental principles, the layman who wishes to participate in the stock market will end up being a speculator. (And fail miserably)

The key to making money in stocks is not to get scared out of them

Peter Lynch
No one could have said it better.

Above is a video interview of Peter Lynch, one of the most successful investors of all time (29.2% annualised returns over 20+ years!). He talks about some of the key principles of owning stocks, and help beginners to condition their mind to think like an investor. If you want to start investing, trust me and watch the video, it will be the best 10 minutes of investment advice of your life.

Reason 2: Fear due to others’ experience

“Investing is scary, my parents lost a lot of money during the market crash in 2008, why would I want to risk my money like that? I put in bank earn interest better.” If this resonate with you, leave a comment down below. Beginners are often fixated with the idea that stock market investing is like gambling, taking on huge risk only to get chased away during a market crash. If you actually understood what investing is, there is no need to be afraid when a market crash comes if you have a long time horizon of more than 5-10 years.

Effects of inflation:Reduced Purchasing Power (Source: BoyceWire)

In fact, it is even worse to leave your spare cash in a bank. With inflation rate at 2%-3% per year, bank interest yields merely 0.05%-2%. By leaving your hard earned cash in a bank, you are being robbed by inflation as we speak. You may not feel the effect on inflation now, but inflation rates compounds over time as well, by not investing you are really losing out in the long run while the value of your cash depletes.

*However, leaving some cash for short term usage such as consumer spending/daily expenses is still a must and it’s important to save up a 6-months emergency fund before you actually start investing.

Source: Google Images: Brightscope

What goes up (Bull Market) will always come down (Bear Market) eventually but the reverse is true as well. In fact, the average Bull market lasts 8.8 years whereas the average Bear Market lasts 1.3 years throughout a time frame of 89 years. This is why it is so important to have a long time horizon when it comes to investing in equities.

By understanding that the stock market goes up in the long term and that market crashes/corrections are part and parcel of investing, you can condition your mind to think like an investor instead of having a short term mindset. If you were to look at the illustration above, you will understand that Bull and Bear markets coexist together and one should not be panic selling when a market crashes. (unless you borrow to invest)

In fact, the right thing to do during a market crash is to pump even more capital into the stock market because you can now purchase undervalued businesses at a cheaper price! Think of a market crash like the Great Stock Sale, since you will be able to buy the same stock at a lower price and at higher quantities, thus increasing your margin of safety.

“Investing need a lot of capital… I don’t have money to invest. Small capital to invest like no use.” This is another common excuse beginners tend to say when it comes to investing. People often believe that investing requires a large sum of capital like a couple hundred thousands or even millions to start, but that is not true! In fact, you can literally get started in investing with as little as less than $100, through RSP or Robo advisors.

Let me give you an analogy: Imagine you are earning $1000. At the end of the month when you get your salary, you are required to pay 20% of your salary to the government. You yell and complain at the idea that 20% of salary is taken away from you and h0w unfair it is to have your hard earned money drained away.

But one fine day the government gave you one condition: If you were to lock this money away from yourself for 10 years(0r more), the government will not only return the salary, but in return give you more than the 20% that it took from you. Upon hearing this, you gladly lock the money away from yourself and wait for 10 years.

Investing is laying out money now to get more money back in the future

Warren Buffet

This is in essence what investing is all about. By being disciplined and setting aside a portion of your income/savings for investing, you allow your hard earned/saved money to work harder for you, even when you’re asleep! Shake off the idea that investing is hard and accept that investing is a must do. Train your mind to think like an investor and avoid short term market noises. Learn to control your emotions and investing will be a self-fulfilling prophecy of success. Investing is the Marshmallow Test of our journey towards Financial Freedom.

Reason 3: Not knowing what you own

This is actually a topic Peter Lynch pointed out in the video mentioned above.

Although it’s easy to forget sometimes, a share is not a lottery ticket, it’s part ownership of a business.

Peter Lynch

Beginner investors often get excited when they make their first investment purchase and make irrational decisions based on emotions of Fear and Greed.(Myself included) Inexperienced investors who make stock purchases for the first time in their lives often rush into buying a stock (as a result of greed/fear of missing out), and thinking that it is cheap by looking at its Price.

This is one of the most fatal mistakes an inexperienced investor can make when they first start out. I remember buying Singtel just because it was cheap without researching into the stock even though its fundamentals have been weak for the past few years due to intense competition and the changing nature of the Telco industry. Translation: the price of a stock alone tells you nothing about the underlying business.

To know what you own, you have to be able to convince a toddler what is so special about the stock and it should not be based on price. I will now talk about a case study which is a question posted on Seedly Forum here. My answer received the most upvotes but regardless, I will adapt the answer again here with greater clarity and explanation.

Question: I am new to investing. Any thoughts of buying SIA shares with the intention to hold on for long term? Given that the price is quite low, is it a wise choice?

Any views on the performance of SIA in the coming years (i.e. 5-10 years)?

And to answer this question, I shall put it this way:

By the rationale of looking at price, the person is justifying whether he should buy SIA shares. However, does he actually know the fundamentals of SIA? The moment he mentioned “Price is quite low”, I immediately knew that this person knows nothing about the fundamentals of the business.

What if SIA were to drop to $2? Or worse case scenario, Temasek decides not to bail SIA out and they end up being a penny stock. Based on the rationale of looking at price, isn’t SIA super attractive? As a beginner, it is easy to be swayed by news to buy into the “Hot Stock” in this case SIA. From a fundamental standpoint, SIA has been a struggling business even before COVID-19, they have an unhealthy debt-equity ratio and their capacity for growth are limited.

Nowadays airlines are offering similar quality as SIA (Ethihad, Qatar) and even budget options for short haul flight, with this Covid situation, do you think demand will be back to Pre-Covid levels??? Applying some common sense, you will understand that SIA is a really troubled business in a really troubled industry. Several airlines are already facing insolvencies (look at Virgin Australia) and you need to also understand about Rights issues.

With Rights Issues, there is no way SIA shares are going back to Pre-Covid levels due to shareholder dilution. The aviation industry is a high-maintenance sector with close ties to the volatile energy sector in the form of jet fuel demand. SIA also require constant spending on Capex and maintaining airplane engines. With fierce competition, SIA does not have a moat.

Like Warren Buffett said, he sold off all his stake in major airlines stocks in March because he made a mistake and can no longer see what is the future ahead for the industry. Instead of looking at price, beginners should learn up fundamental analysis, like how to value a company and reading a company balance sheet. If you can’t do that, you should not be buying individual stocks at all and better off buying an INDEX ETF instead. I am speaking facts and from history, and even from a cognitive standpoint, as beginner investors often think they can pick winning stocks like the professionals (myself included).

 Investing is not a get rich quick scheme nor gambling, it is a marathon about making the least mistake and having holding power.

Know what you own, and why you own it

Peter Lynch

Thank you for reading up to this point. If you feel that you are still confused or overwhelmed by the vast amount of knowledge and strategies out there, fear not as making a progress is better than not making a process. I strongly believe that if one is keen enough to learn more about investing, you will definitely make it and start investing as early as possible. I just want to end Part 1 of this series with a quote that reminds me till today:

How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.

Robert G. Allen

How you can start

TL;DR Syfe Promo Code

For people who are interested to invest into Syfe and wants to open an account, you can use the promo code below as a bonus 🙂

Promo Code: SRPTH8LK3

$10 bonus for the first deposit of $500 (or more)!

$50 bonus for the first deposit of $10,000 (or more)!

$100 bonus for the first deposit to $20,000 (or more)!

Note: Bonus is applicable on the first deposit made only. The bonus will be automatically credited to your portfolio and invested along with your existing investments

I wrote an article about Passive Investment Strategy for Beginner Investors here. Without diving into the contents, you can essentially start by doing Roboadvisors or doing RSP with our local banks. A passive investing approach is a time-tested and foolproof strategy that requires minimal supervision so you can focus on things that matter more to you while your money works harder for you.

The only caveat to this way of investing is it’s a dull, un-exciting approach to investing since returns take time to accumulate and may span across many years before you can start seeing the results. But trust me, it will be worth it if you stay invested in the long run.

Also, if you are interested to sign up StocksCafe, a one stop platform for you to track all your portfolios in one place, click the link here to sign up. You will enjoy an extra month of paid features!(3 months in total) Also, basic features are completely free for all users 🙂 (Yay!)

Key takeaways:

Develop an investor’s mindset (Think long term!)

Understand the purpose of investing

Investing =/= Gambling

Ignore market noises

Control your emotions

Know what you own (Fundamentals, not price)

DO NOT PANIC SELL

Stay invested at all times

Is Syfe’s New Equity100 Portfolio Worth The Hype?

Syfe

Syfe (Roboadivsor) just launched its latest portfolio: Equity 100. It is a 100% equities portfolio which follows a Factor-Based + Smart Beta approach to investing.

Syfe Promo Code

For people who are interested to invest into Syfe and wants to open an account, you can use the promo code below as a bonus 🙂

Promo Code: SRPTH8LK3

$10 bonus for the first deposit of $500 (or more)!

$50 bonus for the first deposit of $10,000 (or more)!

$100 bonus for the first deposit to $20,000 (or more)!

Note: Bonus is applicable on the first deposit made only. The bonus will be automatically credited to your portfolio and invested along with your existing investments

So what is Syfe’s Equity100?

Syfe

From what I understand, Syfe’s Equity100 portfolio was launched on the backbone of their existing Global Risk-Managed Portfolio and catered towards investors who are looking for more aggressive growth, with a full equity allocation.

The existing Global Portfolio offered by Syfe follows a “Modern Portfolio Theory-like” approach, focusing on diversified asset allocation across different asset classes. During the March 2020 Market Crash, I remember my 25% Downside Risk Portfolio being rebalanced and maintained like Ray Dalio’s All Weather Portfolio. It pretty much focused on managing risk with assets such as bonds and gold to hedge against the downside risk brought about by equities.

Personally, I am not a big fan of Gold as an investment but I shall not delve into this topic and leave it for another day. Due to the (more) conservative nature of the Global Portfolio, it may not be optimal when it comes to an aggressive investor with a focus on higher risk-adjusted returns for the long term. Stashaway is a direct competitor and they offer a similar allocated portfolio on their higher risk indexes.

I shall not talk about the framework which the Syfe Equity100 is using as it is already covered by Financial Horse in his article here.

Basket of ETFs based on 3 factors

Syfe

Following a factor-based approach, they are focusing on a portfolio which targets an allocation towards”Large Cap, Growth, Low Volatility.”

The illustration above shows the composition of the portfolio. Its biggest holding is Invesco’s QQQ ETF with a whopping 43% allocation. QQQ is an ETF that tracks the NASDAQ-100 Composite Index which has a Tech-Heavy allocation with famous FAANG stocks like Apple and Microsoft included. Consumer Staples giants like Coca-Cola and Pepsi Co. are part of this ETF as well.

The way I see it, this portfolio is following the trend of Large Cap Technology Growth Stocks with many “new normal” + future macro trends like 5G, Artificial Intelligence, Cloud Computing, E Commerce and IoT in mind. Of course there are core components like the S&P 500 UCITS (and others) to maintain a well-balanced growth upside and downside management.

Based on the webinar with Syfe and State Street, selected sector allocations such as Utilities and Consumer Staples form the “Low Volatility” components of the portfolio as these sectors are historically defensive, and will not fluctuate much during a market crash/high volatility period. The satellite portion are really well thought out in my opinion and may help to manage the downside of this portfolio when markets get volatile.

Worth the risk?

Syfe

Based on its backtested data, the Equity100 portfolio is able to manage downside risk during a downturn(2018&2020) and maximise upside potential (2017&2019) during an uptrend, beating the S&P 500 index and MSCI World Index from 2017 to 2020. However, do note that past performance is not an indicator of future returns, and only time will tell if they can keep up with the outperformance.

Outperforming the S&P 500 ETF

Adapted from my StocksCafe Portfolio

The illustration above shows the performance of my Equity100 portfolio pitched against the S&P 500 ETF(SPY). As you can see, it is outperforming the S&P 500 over a 1 year period, and I am extremely happy with it. (This data is purely computed by myself, not Syfe.)

In my opinion, if Syfe can deliver an annualised return of 10% or more in the long run without my own thorough research and constant need to keep up with the market, it is worth every single penny of my capital for my investments.

Who should consider this portfolio?

Investors with a long term horizon (preferably 5 years or more) are recommended. This portfolio is suitable for young investors in their 20s or 30s (heck any age group) who wants to consider an aggressive “Higher risk adjusted returns” portfolio with the primary purpose of Growth. (Capital Appreciation)

Why do I say young investors?

Younger investors have lesser capital, thus it is important to focus on capital appreciation (gains) during the accumulation phase of our investments. By opting for a growth-based portfolio, we can let compound interest snowball our returns. The earlier you start this Snowball Effect, the lesser capital injection (and faster) to hit financial freedom.

Also, with the low interest yield from bank accounts (0.05%-2.5%), are you gonna let inflation (2%-3% yearly) eat away your precious hard earned money/savings? Instead of letting your spare cash sit idle in a bank, let it work harder for you and generate better returns even when you’re asleep.

So how can a young investor in their 20s capitalise on this offering?

For a start, I am doing Dollar-Cost Averaging by putting in $200 per month into the Equity100. Syfe’s Equity100 will be a small portion of my portfolio which I allocate as a professionally managed section other than my DIY portfolio.

Moving forward, if annualised returns were to be higher than my own DIY portfolio, I may start to increase my capital towards this offering. If I can get better returns without my own research and hard work maintaining my portfolio in the long run, I see no reason why I shouldn’t contribute more towards this offering.

TL;DR Syfe Promo Code

For people who are interested to invest into Syfe and wants to open an account, you can use the promo code below as a bonus 🙂

Promo Code: SRPTH8LK3

$10 bonus for the first deposit of $500 (or more)!

$50 bonus for the first deposit of $10,000 (or more)!

$100 bonus for the first deposit to $20,000 (or more)!

Note: Bonus is applicable on the first deposit made only. The bonus will be automatically credited to your portfolio and invested along with your existing investments

Also, if you are interested to sign up StocksCafe, a one stop platform for you to track all your portfolios in one place, click the link here to sign up. You will enjoy an extra month of paid features!(3 months in total) Also, basic features are completely free for all users 🙂 (Yay!)

Once again thank you for reading to the end and I hope it gave you a clearer picture of what this offering is and how it can help you achieve your investment goals. If you have any queries, you can reach out to me via email: investingbeanstock@gmail.com or leave a comment down below. I wish you all the best and stay invested!

Disclaimer:

The content here is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security. In fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment.

Do note that this is not financial advice. If you are in doubt as to the action you should take, please consult your stock broker or financial advisor.

“Plant your beans early while your soil is fertile”

Investing Beanstock