{"id":523,"date":"2018-09-09T15:53:00","date_gmt":"2018-09-09T07:53:00","guid":{"rendered":"https:\/\/theblockchaininternet.com\/?p=523"},"modified":"2024-07-14T08:10:49","modified_gmt":"2024-07-14T08:10:49","slug":"can-i-afford-not-to-invest-my-money","status":"publish","type":"post","link":"https:\/\/www.theblockchaininternet.com\/?p=523","title":{"rendered":"Can I Afford Not To Invest My Money?"},"content":{"rendered":"
\"Investment
Investment Is A Given In Current Time<\/figcaption><\/figure>\n

Of course, you have the choice to say “Yes or No”. Afterall, it is your money.<\/p>\n

Take a minute to consider why most people don’t able to give a resounding “No!”? Published financial data have consistently showed that not investing your money is a bad decision due to Fiat money is continuing decrease in its value, mainly from inflation, through the years.<\/p>\n

The mixed answers to this question can be as varied as follow:-<\/p>\n

“I’ve already so much money that the interests earned from secured bonds or bank deposits are icings of the cake. Not that important to get higher return from investing in other financial asset classes.”<\/p>\n

“I’ve lost so much money in investing in the past. I’ve no more spare cash to waste on them (or in other words, I’ve no confidence in my ability to get higher returns from my investments).<\/p>\n

“I don’t know how to get started or don’t have the appetite to stomach the huge swings of prices of my invested products.”<\/p>\n

and so on. All of these are valid answers.<\/p>\n

 <\/p>\n

What To Buy<\/strong><\/p>\n

The majority of investors usually select blue-chip stocks for its stable earnings.<\/p>\n

Reason: Blue-chip companies offer security during periods of slowed growth due to their intelligent management teams and ability to generate stable profits. If the stock market is experiencing a bear market, investors don’t need to worry about their investments in blue-chips because, generally, they recover.<\/p>\n

<\/div>\n\n\n\n\n\n\n\n\n\n\n\n\n
Two Approaches to Pick Blue Chips<\/strong><\/td>\n<\/td>\n<\/tr>\n
Value Factor<\/strong><\/td>\nProfitability Factor<\/strong><\/td>\n<\/tr>\n
Asset Heavy<\/td>\nAsset Light<\/td>\n<\/tr>\n
Undervalued<\/td>\nFairly Valued<\/td>\n<\/tr>\n
Capital Gain (Buy Low & Sell High)<\/td>\nDividentds + Capital Gain<\/td>\n<\/tr>\n
Real estate, oil & gas, shipping sectors<\/td>\nF&B, Healthcare services , education sectors<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/tr>\n
(Extract from Dr. Wealth’s\u00a0 SGX Webinar\u00a0 “Selecting Your Blue Chips” on 05-Sep-18)<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/tr>\n
Note:- In comparison, REITs, usually give out higher dividends vs other companies in either consituents.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Let look at STI performance from 2000 to 2017. The Straits Times Index (STI) comprises the largest 30 companies listed on Singapore Exchange (SGX) by full market capitalisation that meet stated eligibility requirements, including free float and liquidity.<\/p>\n

\"StiPerformance\"
STI Performance 1999 to 2017<\/figcaption><\/figure>\n

From 2000 to 2017, the annualised return of #STI is 1.6% p.a. <\/strong>Since inflation from 2000 (CPI 74.809) to 2016 (CPI 98.932) was about 1.8 per cent \u2013 does it mean that the real annualised return of the STI was about -0.2 per cent?<\/p>\n

(Extract from Leong Sze Hian’s article, “STI:-0.3% p.a. real return last 20 years?<\/a>” dated May 14, 2017)<\/span>.<\/p>\n

Fast forward to Friday, Sep 07, 2018, the closing points of STI index is 3147.69. Inflation Rate in Singapore<\/em> averaged 2.60 percent from 1962 until 2018.<\/span><\/p>\n

No wonder being good at investing in local stock market and making higher return than inflation rate is not a walk in the park.<\/p>\n

 <\/p>\n

Let look at some Investing Return Figures from overseas stock market investments.<\/p>\n

\"OverseasStockInvestments\"
Overseas stock market investments<\/figcaption><\/figure>\n

 <\/p>\n

A better proposition indeed, though the investor will require a higher level of investment knowledge and understanding of overseas markets, global economy and the impact of currency risks.<\/p>\n

 <\/p>\n

That leaves us to my original question, “Can I Afford Not To Invest My Money?”<\/strong><\/em><\/p>\n

You possibly would like to say a “No” if you could have a more reliable way of investing your hard-earned money for higher return in building up your fund for big ticket expense item or retirement nest egg.<\/p>\n

The \u201cSage of Omaha\u201d Warren Buffett may provide a clue on how you could do it more confidently. In 2014 letter to the shareholders of his company, Berkshire Hathaway, he has left instructions for his executors on how they should invest his money for his wife when he dies.<\/p>\n

The legendary investor was outlining the \u201cWarren Buffett income drawdown plan\u201d. \u201cIncome drawdown\u201d is the product that retired savers must use if they don\u2019t buy an annuity. What happens is that when you retire in US, and after you have withdrawn a quarter of your pension savings as a tax-free lump sum, the remainder goes into a ring-fenced fund from which you can withdraw, subject to certain rules, your retirement income.<\/p>\n

Drawdown investors face the problem of where to invest. They have a more or less free choice, encompassing cash, shares, bonds, funds and even, depending on the company that runs the plan, more unusual assets such as commercial buildings.<\/p>\n

Mr. #Buffet said, \u201cMy advice to the trustee could not be more simple: put 10pc of the cash in short-term government bonds and 90pc in a very low-cost S&P 500 index fund.\u201d He even tipped a particular tracker fund: \u201cI suggest Vanguard\u2019s.\u201d Mr Buffett said of his suggested retirement portfolio: \u201cI believe the long-term results from this policy will be superior to those attained by most investors \u2013 whether pension funds, institutions or individuals \u2013 who employ high-fee managers.\u201d<\/p>\n

(Extract from a Telegraph article titled, “Warren Buffet: My Perfect Pension Portfolio<\/a>”\u00a0 written by\u00a0 Richard Evans.)<\/p>\n

 <\/p>\n

Can you apply the investment strategy, Mr Buffett has recommended for his wife here?<\/strong><\/p>\n

Yes. though not the particular investment products he recommended in his annual letter to shareholders of Berkshire Hathaway.<\/p>\n

Short-term government bond – Singapore Savings Bonds <\/em><\/strong>Savings Bonds are a special type of Singapore Government Securities (SGS) with features that make them accessible and suitable to individual investors.<\/p>\n