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Happy Chinese New Year! I hope everyone had a good break, ate lots of pineapple tarts and love letters and received many ang pows! For youngsters like me, you may be wondering, “I collected quite a sum this year, how should I allocate my angpow for the future?”
Aside from allocating your angpow for investments, don’t forget to treat yourself/loved ones! It is very important to reward ourselves sometimes and even more important to treat our loved ones who stayed by our side after all these years. (or you can donate to charity and help the needy as well.)
So now that you have allocated the spare amount for long term planning, what are the few things you can go about putting your ang pow money to better use?
The most important question you need to ask yourself first is this:
- When do I need this amount of spare cash?
- Am I willing to lose the amount I put in?
- Why am I investing this amount in the first place?
To answer these questions, you need to reflect back on your own personality and time horizon. Are you currently studying? Or are you a working adult who wants to retire early?
The reason why we want to invest is for 2 simple reasons, and it is to:
- Beat inflation (Protect our purchasing power in the future)
- Capital Gains/Passive Income (Dividends)
Current State of the Economy
Global interest rates are at an all time low nearing zero which indicate a really bullish sentiment for the stock market and crypto markets.
With low interest rates comes low bank interest yields, which in turn will force more savers to seek for higher yield and there is no better place than the stock market and crypto markets.
As of today, there is still a few trillion worth of money tucked in money market funds which means there are plenty more money still waiting in the sidelines that are not invested. This is extremely bullish because it simply suggest that the current bull rally might be sustainable and we may not actually be in a bubble at all.
Like ARK invest CEO Cathie Wood said, she does not believe that we are in a bubble despite how traditional analyst or value investors are saying, as the seeds have been planted back in the 2001 dot com bubble with too much money chasing too little opportunities, which caused the bubble to burst back then.
However, ARK believes that the seed has already been planted and we are now in prime time for disruptive innovation and breakthrough in technology. The 5 innovative platform consisting of 14 different technology are entrenched into every single sector of the economy, and technology is no longer a sector but so widespread that it is necessary in every business.
2021 will be the year of crypto (and more importantly, Bitcoin)
The breaking news of 2021 so far was when Tesla announced that they are allocating not 1% but 8% of their cash balance of $1.5 Billion USD into Bitcoin. This is huge.
This basically means that Bitcoin is a legitimate asset class that can be adopted by institutional investors around the world and the growth of the asset class has only just begun.
With companies such as Tesla, Square, Paypal and Microstrategy jumping into Bitcoin, while major finance companies such as BNY Mellon, Deutsche Bank, Mastercard and Morgan Stanley launching crypto investments, custodies and exchanges, the runway for Bitcoin is only just the beginning.
In 2021, I expect to see more companies switching a portion of their cash allocation over to Bitcoin with varying percentages, and this will be a real game changer for the investing world.
As central banks print more money while Bitcoin supply decreases over time, it will only drive the demand of the alternative asset class higher and higher until eventually it is recognised as a global currency and by then, Bitcoin might already be worth 100k USD or more per coin.
So the logical step is to invest your ang pow money into crypto and we shall go through in detail below.
1. Invest your Ang Pow into Bitcoin/Ethereum
To add on what I said earlier, ARK Invest CEO Cathie Wood mentioned that based on their research, allocating 10% or more into Bitcoin will reduce overall portfolio risk, and at the same time improve returns, which translates to better risk-adjusted returns due to the lack of correlation between the stock market and Bitcoin.
Hence, I feel that it is important to allocate into Bitcoin in order to boost overall returns while reducing your portfolio’s risk.
For myself, I am dollar cost averaging into Bitcoin frequently and already up 86% year-to-date for Bitcoin, which is truly amazing. I currently have a 12% allocation to crypto (Bitcoin + Ethereum) with regards to my overall portfolio and I aim to hit a target allocation of 25% of my overall portfolio.
I currently use Gemini Exchange using SGD to purchase my crypto assets. If you wish to read up more, I did a review of Gemini here.
After purchasing the crypto assets from Gemini, I transfer them via the blockchain into my Nexo wallet where I earn 5% interest on my idle assets (Bitcoin/Ethereum). Nexo offers 8% interest for Stablecoins such as USDT, USDC, DAI and more. So if you want better interest for your cash, you can check out Nexo as well. (Nexo offers bank grade security and crypto insurance up to 100 million by renowned crypto custodian BitGo)
How to buy crypto on Gemini and transfer to Nexo?
- Open a Gemini account
- Link your bank account to Gemini
- Deposit into Gemini using Xfers (using your bank account)
- Purchase crypto using Gemini app
- Withdraw crypto from Gemini (key in Nexo Wallet address)
- Confirm the transaction
Gemini Referral Code
For those who are interested to sign up with Gemini and invest into Bitcoin and more, you can click on this referral link here and receive US$10 in Bitcoin after you top up at least US$100 on Gemini!
2. Invest your Ang Pow into Syfe Equity100
If you are a beginner with little knowledge or an investor with little time or no interest to read business news daily or research on individual stocks, Syfe Equity100 will be your best bet.
This portfolio consist of 12 ETFs, and follows a smart beta approach using factor investing. In layman terms, it is basically a systematic portfolio which offers high risk-adjusted returns by following a 3 factors which is used to construct the investment portfolio.
Just by investing $1000 for example, you will be exposed to over 1500 stocks around the world which would not be possible if you were to buy individual stocks yourself.
Equity100 is a powerful core portfolio component for you to build your base and simply allow them to compound your money while you do other things. Their fees are also low at 0.4%-0.65% per annum.
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 $1000 (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
3. Invest in Yourself (Knowledge is Power)
The last way might in fact, be the most important of it all. While you can put your angpow money into Bitcoin and Syfe Equity100 without any prior knowledge and still generate great returns, the best way to ensure that your investments will remain sustainable and grow at a high rate of return is for you to build up your own knowledge, learn how to invest using fundamental and technical analysis and actively reading up to catch up and adopt a growth mindset.
To kickstart your knowledge journey, I recommend you to read these few books as soon as possible in the order which I wrote them.
- Rich Dad Poor Dad by Robert Kiyosaki
- The Little Book that Still beats the market by Joel Greenblatt
- One Up on Wall Street by Peter Lynch (My Personal Favourite)
- The University of Berkshire Hathaway by Daniel Pecaut
- The Intelligent Investor by Benjamin Graham
Once you are done with these 5 books, you most probably have all the knowledge you need to invest yourself. If you do not have the time to read these books, you can watch the summarised version of them on “The Swedish Investor” YouTube channel to learn more.
The most important thing to understand form this article is to know that investing is a long term commitment and although short run we may not be able to see the compound interest take place or things don’t go according to our predictions, it is important to tune out short term noises and think long term, understand that investing is a marathon and not a sprint.
“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 (Warren Buffett’s Mentor)
In the short run, the market will be driven by sentiments and hype, but in the long run, earnings and performance will eventually reflect the true price of a stock. Hence, understand why stocks go up and why it goes down, why some stocks go up faster than others and why simply don’t go up at all.
All these questions will be answered if you read up on them in the books mentioned, thus, I urge beginners to read these books diligently as all the knowledge of the great investors are already written down for us to read, it is up to us to pick up the knowledge and use it to our advantage.
Alright, here’s to a great year ahead and I hope everyone finishes 2021 with great returns! Let me know if you have any questions in the comments below!