Speaker 1: This is a C. N. A.
Speaker 2: Podcast.
Speaker 1: Hello and welcome to our brand new podcast. Money talks,
Speaker 1: my name is Sarah al Khaldi and I'm a business
Speaker 1: news presenter at C. N. A. As a young mother
Speaker 1: and like many others of my generation, I want to
Speaker 1: get better with my money. So each week I'll tap
Speaker 1: into different experts from C. E. O. S. Two financial
Speaker 1: advisors
Speaker 1: and we'll find out how to make wiser financial decisions
Speaker 1: relating to how we live, work and play.
Speaker 1: We'll go for some quick fire questions in a few words.
Speaker 1: Can you give us your thoughts on the following?
Speaker 2: Okay, high
Speaker 1: inflation. It
Speaker 2: will come down.
Speaker 1: Green finance
Speaker 2: definitely worth looking
Speaker 1: at robo advisors
Speaker 2: definitely worth considering also
Speaker 1: china.
Speaker 2: Um
Speaker 1: okay
Speaker 2: china belongs in the slightly riskier part of your portfolio
Speaker 1: investment scams,
Speaker 2: definitely be wary of them. Don't trust anybody. The old
Speaker 2: rule of thumb is trust but verify.
Speaker 1: Great.
Speaker 1: Yeah.
Speaker 1: We kick off the series with a renaissance man of money.
Speaker 1: David cho is the co founder of the smart investor,
Speaker 1: a website dedicated to educating people about how to grow
Speaker 1: their wealth. David himself has been growing his money for
Speaker 1: decades and I want to ask him if it's true
Speaker 1: that you need money to make money, can you afford
Speaker 1: not to invest and how should you spend your hard
Speaker 1: earned bonus, David, thanks for joining us
Speaker 1: for those starting out on their investment journey. What would
Speaker 1: an ideal portfolio look like?
Speaker 2: Okay, before I even start doing that, Sarah what I
Speaker 2: would like to say is
Speaker 2: you have to invest and the sooner you invest the
Speaker 2: better it is for you
Speaker 2: and for those people who haven't started investing for their
Speaker 2: retirement or later on in life. There is a general
Speaker 2: rule of thumb that says that
Speaker 2: You take your age and you divide it by two
Speaker 2: and that is the percentage of your salary that you
Speaker 2: should be putting aside into an investment. So if you're
Speaker 2: a 20 year old and you just starting work
Speaker 2: I don't know how many people start working 20 but
Speaker 2: a 20 year old who's starting work, you should be
Speaker 2: putting 20 divided by two which is 10% of your
Speaker 2: salary
Speaker 2: Into an investment. Now if you leave it later, if
Speaker 2: you wait until you're 30 years old before you start
Speaker 2: investing you're gonna have to put aside 15% of your salary,
Speaker 2: 30 valid by two is 15. If you wait until
Speaker 2: you're 50 before you do anything, you're going to have
Speaker 2: to put aside 25% of your salary
Speaker 2: in order to be able to enjoy your retirement. So
Speaker 2: that's a quarter of your salary going into some kind
Speaker 2: of investment. And so the secret really is
Speaker 2: to start as early as possible.
Speaker 2: And as soon as you start work, start putting some
Speaker 2: money aside into a portfolio so that you will be
Speaker 2: able to let that money grow over time and then
Speaker 2: enjoy life later on when you get older. So that
Speaker 2: is the general rule of thumb as to what the
Speaker 2: portfolio should look like.
Speaker 2: Again, it is actually sort of based on your age
Speaker 2: and the general rule of thumb, there is, it's called
Speaker 2: the rule of 100 and the rule of 100 simply
Speaker 2: states that
Speaker 2: you subtract
Speaker 2: your age from 100 that is the amount of money
Speaker 2: that should be going into riskier investments. Okay, so if
Speaker 2: you are a baby, if you're investing safe for your
Speaker 2: child and your child is zero age on the day
Speaker 2: that they are born, 100% of whatever money you're going
Speaker 2: to be putting to one side
Speaker 2: Should be going into a riskier investments such as the
Speaker 2: stock market. And as you get older, less of that
Speaker 2: money should be in the riskier side and more of
Speaker 2: it should be in the less risky side. So things
Speaker 2: like stocks and bonds. So if you are for instance
Speaker 2: a 20 year old, then
Speaker 2: 80% of whatever you are going to be saving
Speaker 2: Needs to be put into the stock market and the
Speaker 2: other 20% can be put into other things such as
Speaker 2: Singapore savings bonds or cash or whatever. But 80% of
Speaker 2: it should be in riskier investments such as stock market
Speaker 2: primarily because that is the only way you're going to
Speaker 2: be able to grow your money.
Speaker 1: A lot of young people though are saying, but I
Speaker 1: have CPF
Speaker 2: Yeah,
Speaker 1: so why do I have to go to the stock
Speaker 1: market if I have CPF to rely on?
Speaker 2: I agree with that totally. And I think the CPF
Speaker 2: is a great thing because it forces people to save
Speaker 2: Now in many countries, particularly one where I grew up
Speaker 2: in Hong kong they didn't have a mandatory savings scheme
Speaker 2: for people
Speaker 2: and so nobody actually saved because you weren't forced to save.
Speaker 2: But here in Singapore, you are forced to save for
Speaker 2: your retirement. But
Speaker 2: that money goes into the CPF fund and if you
Speaker 2: just allow it to grow
Speaker 2: using the interest that is actually being paid for you
Speaker 2: and that only gives you around 2.5% that is not
Speaker 2: going to be enough. And I go back again to
Speaker 2: that rule of 100 which is how much of that
Speaker 2: money in the CPF should be in stocks, how much
Speaker 2: should be in cash and bonds that will tell you
Speaker 2: what you are allowed to invest in.
Speaker 2: But the CPF has very strict rules, so the amount
Speaker 2: of money that you put into the CPF will not
Speaker 2: be sufficient for you to grow that money over time
Speaker 2: because they restrict the amount of money that you can
Speaker 2: invest in stocks and bonds, you can't take the money
Speaker 2: out from the CPF, but you need to invest outside
Speaker 2: of the CPF
Speaker 2: in order to achieve that kind of balance because otherwise
Speaker 2: When you reach 55 or 60 or 65 years of
Speaker 2: age and you have a look at what that money
Speaker 2: has done for you, you will say I'm not going
Speaker 2: to have enough to retire on. And that is the
Speaker 2: big danger that you have because whilst it is great
Speaker 2: for somebody to force you to save money,
Speaker 2: that money will not be sufficient for you. When you
Speaker 2: retire a
Speaker 1: lot of money to goes to your house, those getting
Speaker 1: an H D B a loan or a mortgage loan
Speaker 1: and some people are saying, OK, I'll just rely on
Speaker 1: my property, I'll rely on my HDB when I get older,
Speaker 1: I'll just sell it or downgrade and maybe
Speaker 1: that can help beef up my retirement from my CPF.
Speaker 1: What do you think of that?
Speaker 2: I don't disagree with that either. If you have a
Speaker 2: look at property, property prices tend to appreciate over time.
Speaker 2: And you have to have a look at some examples
Speaker 2: outside of Singapore, there are lots of people in the U. K.
Speaker 2: For instance, that have put their money into their property
Speaker 2: and just as you have highlighted, they say, well, you know,
Speaker 2: my property can be my pension later on, but
Speaker 2: how is that even possible? Because you have to downgrade,
Speaker 2: you have to sell your house in order to do
Speaker 2: something
Speaker 2: and over in the UK, they've come up with some
Speaker 2: really ingenious schemes, such as mortgage equity, withdrawal, lifetime mortgages
Speaker 2: whereby you can say, oh, I'll take a portion of
Speaker 2: that equity that I have in my house and I
Speaker 2: don't have to repay that. But instead I'll be able
Speaker 2: to live off that lump sum that I take from there?
Speaker 2: And on the other side,
Speaker 2: whoever is actually financing that lump sum that you've taken
Speaker 2: out will roll up the interest slowly over time. And
Speaker 2: as we know, if you keep on doing that, eventually
Speaker 2: the interest will become quite onerous. But you don't have
Speaker 2: to worry about it. You don't have to pay it off.
Speaker 2: But
Speaker 2: on the day that
Speaker 2: you pass away, you may actually find that
Speaker 2: The 100,000 or the 200,000 you took out from your
Speaker 2: property plus the interest that has been accruing will mean
Speaker 2: that there is no equity left in your property at all.
Speaker 2: And so if you thought that I would be able
Speaker 2: to leave the property to my Children, that isn't going
Speaker 2: to happen. Because the person who will be taking the
Speaker 2: property will be the insurance company,
Speaker 2: not your Children.
Speaker 2: So you spent your life buying a property, financing the
Speaker 2: property through mortgage repayments. And then you hope that you
Speaker 2: will be able to leave something for your Children. And
Speaker 2: you find out that you've got nothing left for your
Speaker 2: Children at all. And so you're not really sort of
Speaker 2: helping the next generation.
Speaker 1: Now, there was a survey done recently last year by
Speaker 1: franklin Templeton and it showed that a third of young
Speaker 1: singaporeans think that making the right investment is difficult and
Speaker 1: investments make them anxious. So where do you think they
Speaker 1: should start? And do you think this is something that
Speaker 1: they can do alone or should they tap into an
Speaker 1: advisor perhaps or some
Speaker 1: kind of person who will give them advice on their investments.
Speaker 2: There are several ways of looking at that and
Speaker 2: my philosophy and it's not my philosophy, but it's just
Speaker 2: a general philosophy of most people.
Speaker 2: Is that that rule of 100 will apply right. That
Speaker 2: rule of 100 has been around for a very long time.
Speaker 2: And the rule of 100 will help to guide you
Speaker 2: as to how your portfolio should look. So if you
Speaker 2: are a 40 year old, then 60% of that portfolio
Speaker 2: should be in stocks
Speaker 2: And the other 40% should be in cash and bonds.
Speaker 2: And just use that as your template. Now, the other
Speaker 2: question is that 60% that you put into stocks, how
Speaker 2: should I allocate that 60%. Should I just go and
Speaker 2: take the 60% and go and buy investments in emerging markets?
Speaker 2: Should I buy penny stocks? Should I do what
Speaker 2: The answer is no right? You don't do that. You
Speaker 2: take that sum of money that 60% that you're going
Speaker 2: to be investing in the stock market and then whatever
Speaker 2: that amount of money is, you then need to apply
Speaker 2: another rule and this is the rule that has stood
Speaker 2: the test of time. And what that rule actually says
Speaker 2: is that 60
Speaker 2: of that amount of money should be in safer investments.
Speaker 2: So by that we're talking about income generating stocks. And
Speaker 2: here in Singapore, we have this wealth of real estate
Speaker 2: investment trusts. So if you are going to be putting
Speaker 2: that money into the stock market
Speaker 2: than 60% into strong income generating stocks such as
Speaker 2: The real estate investment trusts or maybe the bank shares
Speaker 2: that we have here in Singapore, they pay good dividends.
Speaker 2: The Singapore stock exchange is another good example of a
Speaker 2: company that is able to reward you with regular dividends.
Speaker 2: So that is the 60% of whatever you're going to
Speaker 2: be putting into the stock market,
Speaker 2: then you have the 30% which is slightly riskier investments.
Speaker 2: And these are the faster growing companies. And unfortunately in Singapore,
Speaker 2: we don't have that many faster growing companies. So you
Speaker 2: have to look overseas for that. So, a good place
Speaker 2: to go and sort of look for those kind of
Speaker 2: stocks would be NASDAQ
Speaker 2: where you have a lot of faster growing companies.
Speaker 2: So if you do your math 60 plus 30 is
Speaker 2: 90 that still leaves you 10% and that 10% can
Speaker 2: be then put into what we call speculative investments. And
Speaker 2: so as long as you have that, whether you want
Speaker 2: to call it the pyramid or the beer bottle call
Speaker 2: it whatever you want,
Speaker 2: you must have a stable base of income generating shares,
Speaker 2: some faster growing shares and then the other 10% put
Speaker 2: into whatever you want, I don't care what you put
Speaker 2: it into. Put into something that you think is going
Speaker 2: to be quite exciting for you. Be the value shares,
Speaker 2: shares that you think have been undervalued by the market.
Speaker 2: You could even put it into Cryptocurrency, I don't really
Speaker 2: care what you put that 10% of your investment into,
Speaker 2: But don't fool around with the 60% of the income
Speaker 2: shares and the 30% of the growth shares because that
Speaker 2: will generate for you. The kind of returns that you require.
Speaker 1: Conventional investment wisdom says that over time stock markets go
Speaker 1: up despite the volatility in the near term. Do you
Speaker 1: think that still holds now, Do you think
Speaker 1: decades down the line, we can still get some kind
Speaker 1: of return from equity market investments right now.
Speaker 2: Oh, for sure. You see one of the big problems
Speaker 2: that investors have, and I'm not just talking about new
Speaker 2: investors coming into the market, I'm talking about seasoned investors also,
Speaker 2: What they suffer from is something called recent events syndrome
Speaker 2: and recent events syndrome just says that what is happening
Speaker 2: now is going to be happening into the future and
Speaker 2: it scares them, right. They think that the kind of
Speaker 2: geopolitical problems that we have at the moment is going
Speaker 2: to persist for the very long term. And that isn't true, right?
Speaker 2: If we have a look at the stock market, say
Speaker 2: over the last
Speaker 2: 70 years, which is slightly older than me. But over
Speaker 2: the last 70 years we have had 10 bear markets
Speaker 2: right over that 70 year period. And each time we've
Speaker 2: had a bear market, we've recovered
Speaker 2: Somehow we have recovered. So if you say 70 years
Speaker 2: and we've had 10 bear markets, that's one bear market
Speaker 2: every seven years. So if you are a new investor now,
Speaker 2: you are going to be experiencing a bear market roughly
Speaker 2: every seven years. I wouldn't set my clock on my
Speaker 2: calendar by it. But roughly about every seven years you're
Speaker 2: going to see
Speaker 2: a downturn in the stock market. But don't be scared
Speaker 2: by it. When you get that downturn jump in and
Speaker 2: buy more shares, right? Just carry on carry on investing.
Speaker 2: It's going to be harder at the moment because inflation
Speaker 2: is a big problem. And there will be some people
Speaker 2: out there that will be saying,
Speaker 2: hey, inflation is so bad. I can't afford to invest. Well,
Speaker 2: don't fall into that trap. Cut whatever you can, but
Speaker 2: don't cut the amount of money that you're going to
Speaker 2: be investing for your long term future because that is very,
Speaker 2: very dangerous. You might think, oh,
Speaker 2: I won't put my $100 or my $200 into my
Speaker 2: savings pot now because I need it in order to
Speaker 2: buy food or whatever, do anything else. But don't sacrifice
Speaker 2: that $100 that you're going to be putting into the
Speaker 2: market and don't listen to those people who are saying,
Speaker 2: oh the market is terrible at the moment is going
Speaker 2: to go down even further. Well if it goes down
Speaker 2: even further,
Speaker 2: you are a long term investor. So
Speaker 2: if you don't buy today and you think I can
Speaker 2: buy tomorrow, well tomorrow, the prices could be higher. Nobody
Speaker 2: will tell you when the bottom of the market is there.
Speaker 2: So don't fall into that trap.
Speaker 1: Yeah, that's an interesting point because markets have been under
Speaker 1: a lot of pressure this year and some young investors
Speaker 1: are experiencing their first down market or bear market ever.
Speaker 1: I've had people tell me they're down thousands of dollars
Speaker 1: in the stock market right now. So what advice would
Speaker 1: you give them?
Speaker 2: Well, I was up last night and I was buying
Speaker 2: shares last night, even though the market was down,
Speaker 2: I don't really care because primarily I am an income investor.
Speaker 2: And what that really means is that I am buying
Speaker 2: shares that have the ability to pay me dividends regularly.
Speaker 2: Some of those dividends come in quarterly, some come in
Speaker 2: semi annually, some only come in once a year.
Speaker 2: But the stocks that I buy are rewarding me with income.
Speaker 2: And because I've been investing for such a long time sarah,
Speaker 2: my biggest problem
Speaker 2: is the amount of cash that is coming into my
Speaker 2: portfolio
Speaker 2: and for the young people that are investing today, you
Speaker 2: will have the same problem later on in life. It
Speaker 2: may not seem like that
Speaker 1: now doesn't seem like
Speaker 2: It may not seem like that now, but in 2030
Speaker 2: years time you will have that problem because the cash
Speaker 2: generated from the investments that you have made
Speaker 2: will be coming in regardless of what is happening in
Speaker 2: the market.
Speaker 2: I will be collecting dividends from one of Singapore's banks
Speaker 2: today and whether the market is
Speaker 2: high, whether the market is low, it will be paying
Speaker 2: me a dividend. So my problem is
Speaker 2: putting that money to work and looking at where it
Speaker 2: is going to be able to generate for me more
Speaker 2: money in the future. And that is what you should
Speaker 2: be looking at, not what is happening today.
Speaker 1: And because if you don't put that to work, David,
Speaker 1: the value of that money will go down because prices
Speaker 1: are now going up, inflation
Speaker 1: going up. And that is a problem that we all
Speaker 1: have to face, isn't it?
Speaker 2: Well, quite right, Sarah. I mean if if you have
Speaker 2: $100 today and you don't put it to work
Speaker 2: In a year's time with 5% inflation, that $100 will
Speaker 2: only buy you $95 worth of goods. That is what
Speaker 2: inflation really means is that it is the shrinking of
Speaker 2: the money that you have. If you don't put it
Speaker 2: to work somewhere else now, the other thing is
Speaker 2: Right, I'm going to throw in another rule of thumb, right?
Speaker 2: I promise no more rules of thumbs after this because
Speaker 2: I haven't got that many thumbs. Yeah. Okay, so the
Speaker 2: third rule of thumb is the rule of 72. Right?
Speaker 2: And what that really tells you is if you take
Speaker 2: an investment and you have some rough idea as to
Speaker 2: how that investment is going to be rewarding you over
Speaker 2: the long term,
Speaker 2: Take that percentage divided into 72 and that will tell
Speaker 2: you how long it will take your money to double. Okay,
Speaker 2: so let's for argument's sake say that you put it
Speaker 2: into the Singapore stock market, a good stable Singapore stock
Speaker 2: market and on average it should give you about 7%
Speaker 2: return a year.
Speaker 2: So it means that if you put $100 into the
Speaker 2: Singapore stock market today, that $100 should double in 10
Speaker 2: years time, 72 divided by seven is roughly 10. So
Speaker 2: it means that the $100 will double to $200 in
Speaker 2: 10 years time. The $200 will double to $400 in
Speaker 2: another 10 years time.
Speaker 2: So in 20 years time, your $100 will have turned
Speaker 2: into 100 204 $100
Speaker 2: In 20 years time. Now if you don't put $100
Speaker 2: in this year, you're gonna be missing out on $400
Speaker 2: in 20 years time.
Speaker 2: And that is really what you should be looking at
Speaker 2: over the long term.
Speaker 2: And if you think, oh, I won't put the $100
Speaker 2: in because I need $100 for something else, find $100
Speaker 2: or don't spend $100 on the other things, but put
Speaker 2: the $100 in because you're going to be missing out
Speaker 2: on $400 in 20 years time and that is what
Speaker 2: you should be looking at, not what is happening today.
Speaker 1: We're going for a short break, we'll be
Speaker 2: right back.
Speaker 1: Hi, my name is julie you and I'm the host
Speaker 1: of the new season of the climate conversations
Speaker 1: from chefs to scientists, join me as we get personal
Speaker 1: with the people driving change in sustainability. Look out for
Speaker 1: our episodes wherever you get your podcasts, you're a seasoned investor,
Speaker 1: you've done this for so many years and as you mentioned,
Speaker 1: you've got a lot of cash coming in, But do
Speaker 1: you still remember your first investment loss when you saw
Speaker 1: all the red and the screen and you felt that
Speaker 1: it affected your perspective on investments?
Speaker 2: Both. Yes and no, I think I learned some very
Speaker 2: valuable lessons when I first started investing and one of
Speaker 2: the biggest lessons I learned was that I invested in
Speaker 2: the company,
Speaker 2: which at the time was a very stable company.
Speaker 2: But then this company decided that it wanted to take
Speaker 2: advantage of what was going on in the booming dot
Speaker 2: com era. And so consequently it changed its business model
Speaker 2: and because it changes its business model,
Speaker 2: it borrowed a lot of money and eventually it went past.
Speaker 2: And so the biggest lessons I learned was if you
Speaker 2: were investing in a business,
Speaker 2: then make sure that this company is going to carry
Speaker 2: on doing what it said, it was going to be
Speaker 2: doing right.
Speaker 2: Don't invest in the company. That suddenly changes direction and
Speaker 2: does something else. Because that wasn't your original investing thesis.
Speaker 2: That wasn't the company that you invested in. This company
Speaker 2: originally made household goods and all kinds of things and
Speaker 2: suddenly decided that it wanted to go into the internet
Speaker 2: and in order to do that, it borrowed a lot
Speaker 2: of money. Then the dot com bubble came and it
Speaker 2: couldn't repay the debt, it went bust and I lost
Speaker 2: my money. But in the short term the share price
Speaker 2: went up phenomenally. And I thought, what a clever guy
Speaker 2: I am right. But then I forgot my first investing rule,
Speaker 2: which was
Speaker 2: don't lose money,
Speaker 2: right? And the second investing rule is, don't forget rule
Speaker 2: number one, don't lose money if you were invested in
Speaker 2: the company and it suddenly changes direction.
Speaker 2: Think twice about whether or not you want to carry
Speaker 2: on investing in that company. And generally it is not
Speaker 2: a good idea when a company does that.
Speaker 1: What happens though? If you as an investor can't track
Speaker 1: all these businesses that closely if I have to invest
Speaker 1: all this money in the stock market, how do I
Speaker 1: ensure that all these companies are going to stay on
Speaker 1: track to what they set out to do.
Speaker 2: Okay. There are two ways of doing it. Sarah. The
Speaker 2: first one is keep your portfolio relatively small.
Speaker 2: And so generally we say that you shouldn't invest if
Speaker 2: you're going to be picking single stocks. Single companies don't
Speaker 2: try and invest in hundreds or thousands of different companies
Speaker 2: but keep your portfolio to around the 20 best companies
Speaker 2: that you think you want to put your money into
Speaker 2: and tracking 20 companies isn't that difficult?
Speaker 2: But
Speaker 2: my Children are at that stage now where they also
Speaker 2: need to start investing money. And my advice to them
Speaker 2: was invest in an index tracker and E. T. F.
Speaker 2: And the E. T. F. That I suggested to them
Speaker 2: was the MSC I World Index. And so you will
Speaker 2: get exposure to the whole world and within that index
Speaker 2: there will be thousands of companies and you don't have
Speaker 2: to actually sort of know what is going on and
Speaker 2: instead just let the index tracker do whatever you wanted
Speaker 2: to do.
Speaker 2: Now if you don't want to go overseas, you can
Speaker 2: stick to the Singapore straits times E. T. F. And
Speaker 2: that way you will have exposure to Singapore's 30 biggest companies.
Speaker 2: You don't have to watch how all 30 are doing
Speaker 2: because that index will regenerate over time. It'll refresh over time.
Speaker 2: Companies will go out to the index companies will come
Speaker 2: into the index.
Speaker 2: But what you are getting is
Speaker 2: Exposure to the 30 biggest companies here in Singapore that
Speaker 2: way you don't have to worry about anything. So going
Speaker 2: back to all those different rules that I had, if
Speaker 2: you're going to be putting 60% of your money into
Speaker 2: the stock market, make sure that 60% is in the
Speaker 2: Singapore Straits Times Index
Speaker 2: and just let the do it for you. You don't
Speaker 2: have to do anything
Speaker 2: and the charges are considerably lower as well.
Speaker 1: If our listeners have some extra cash, let's say from
Speaker 1: a bonus payout or even a side hustle, where do
Speaker 1: you think they should put it
Speaker 2: right, you have to go back again to those earlier
Speaker 2: rules that I had. And first of all remember that
Speaker 2: a bonus payment isn't guaranteed. So a bonus this year
Speaker 2: may not be a bonus next year. There may not
Speaker 2: be a bonus next year, but if you have got
Speaker 2: some extra cash then put it to work straight away.
Speaker 2: What I wouldn't suggest is to spend that money
Speaker 2: or to go on holiday because it is a bonus.
Speaker 2: But just think of it as being something that you
Speaker 2: can put to work immediately and if there are various
Speaker 2: parts of your portfolio that you think need beefing up
Speaker 2: then do so just put that money in because remember
Speaker 2: what I said, the $100 that you put in today
Speaker 2: at a 7% return
Speaker 2: Will turn into $200 in 10 years time and $400
Speaker 2: in 20 years time. So just think of that bonus
Speaker 2: as being something extra. And the other thing that people
Speaker 2: need to remember is that
Speaker 2: It isn't what you earn that makes you rich Sarah.
Speaker 2: It's how you spend what you've got that counts, right?
Speaker 2: And so the bonus is an extra and so put
Speaker 2: that to work somewhere and you will not regret it
Speaker 2: in 20 or 30 years time
Speaker 1: you just talked me out of buying a nice bag.
Speaker 2: There's nothing wrong with having a nice bag. No.
Speaker 1: Back to what you're saying about putting your money to work.
Speaker 2: My goodness, my husband.
Speaker 1: Um back to what you're saying is putting your money
Speaker 1: to work immediately, not making sure it's not just sitting there.
Speaker 1: There is another side to this where recently we've seen
Speaker 1: a lot of young people put their money in the
Speaker 1: crypto market or crypto related products and like what we
Speaker 1: saw in the stock market, the crypto market has also
Speaker 1: been battered. We heard what happened with us T and
Speaker 1: luna crashing one report by Today online said one investor
Speaker 1: here in Singapore lost $40,000 just in days. So what
Speaker 1: do you think young investors should take away from this experience?
Speaker 2: Okay, remember what I was saying about the pyramid, right? 60%
Speaker 2: in income shares, 30% in grow shares and the other 10%
Speaker 2: In whatever you want now, if that whatever you want
Speaker 2: that 10% you put into cryptocurrencies and then you suddenly
Speaker 2: had a look at your pyramid
Speaker 2: And you suddenly found that that 10% is now 60%
Speaker 2: of your portfolio. You need to rebalance, you need to
Speaker 2: do something and keep that at 10% because otherwise, what
Speaker 2: you'll end up with is the pyramid being tipped upside
Speaker 2: down and we all know that you cannot balance a
Speaker 2: pyramid on its point easily. So that is what happened
Speaker 2: to these people.
Speaker 2: They put their money into the crypto currencies and sure
Speaker 2: they probably made a lot of money. What they should
Speaker 2: have done was to take that money that they had
Speaker 2: made and then rebalance their portfolio so that the cryptocurrencies
Speaker 2: or whatever it was, is still only 10% of your
Speaker 2: portfolio that way, if you lose 10%, you still have 90%.
Speaker 2: But if that 10% suddenly becomes 60% of your portfolio
Speaker 2: and that blows up, then you've lost 60% of whatever
Speaker 2: investment you had. So the pyramid is a very, very
Speaker 2: sort of strong base. It's a very strong concept for
Speaker 2: people to think about how their portfolio is looking. And
Speaker 2: I am,
Speaker 2: I wouldn't say constantly, but I'm regularly looking at my
Speaker 2: portfolio and say
Speaker 2: Have I got 60% in income, have I got 30%
Speaker 2: in growth and that other 10% of those investments that
Speaker 2: I have have, they grown too big. If they have
Speaker 2: then I need to either number one put more money
Speaker 2: into the income side or number to try and reduce
Speaker 2: the amount on the top by selling some of it
Speaker 2: in order to
Speaker 2: maintain that pyramid shape again. And if you have the
Speaker 2: pyramid shape, I can assure you you will sleep very
Speaker 2: well at night. But if that pyramid is tipped upside
Speaker 2: down and it's balancing on its point, you will have
Speaker 2: loads of sleepless nights and I love my sleep.
Speaker 1: Don't you mentioned that as a rule of thumb, your
Speaker 1: investment should double in 10 years if you get a 7% return,
Speaker 1: is that right?
Speaker 1: Where do we find 7% returns now? You're seeing the
Speaker 1: market down and sometimes it's quite discouraging when I think 7%.
Speaker 1: Where do I go?
Speaker 2: Okay, right. I think it is primarily because you are
Speaker 2: falling into that same trap of the recent event syndrome.
Speaker 2: You're saying that the stock market is down at the moment.
Speaker 2: But if you go back and you have a look
Speaker 2: at
Speaker 2: Over the long term, if you have a look at
Speaker 2: how the stock market has performed over the long term,
Speaker 2: you will be able to find the 7% right. It is,
Speaker 2: it is not that difficult.
Speaker 1: 7% over 10 years. Not every year,
Speaker 2: 7%. Every year.
Speaker 1: Every year, I'm looking at
Speaker 2: 7% a year accumulating
Speaker 2: Over the ten-year period. So you should be able to
Speaker 2: get a 7% return on your investment
Speaker 2: Without a great deal of difficulty. If you want more
Speaker 2: than that, then you will have to actually start looking
Speaker 2: at shares that I have the capability of delivering more
Speaker 2: than the 7% return. But in general you should be
Speaker 2: able to get at least 7%, I'm getting more than that.
Speaker 2: But where
Speaker 2: that is because I am
Speaker 2: That is because I am more tolerant of risk. And
Speaker 2: so I am able to pick stocks that have the
Speaker 2: ability of growing 15, a year. And because I do
Speaker 2: that my portfolio grows a lot faster than 7% a year.
Speaker 2: So if you can pick
Speaker 2: A portfolio that can grow at 14% a year,
Speaker 2: Then you will double your money every five years instead
Speaker 2: of every 10 years. There are those investments around
Speaker 1: you mean like specific stocks versus index funds that you mentioned.
Speaker 2: If you want to look for index funds that have
Speaker 2: the ability to grow faster than 7%, then you will
Speaker 2: have to have a look at certain specific indices. So
Speaker 2: something like a bunch of stocks that follow NASDAQ will
Speaker 2: give you more than 7% a year.
Speaker 2: But if you have a look at say the Singapore
Speaker 2: Straits Times Index, that is around 7% a year.
Speaker 1: Okay, anything else that you think the young investors should
Speaker 1: keep in mind or any mistakes that you, you're seeing
Speaker 1: too often.
Speaker 2: I think the biggest problem that people have is listening
Speaker 2: to
Speaker 1: say it, David,
Speaker 2: no, is listening to experts out there, right. There are
Speaker 2: many experts out there, and the problem with experts is
Speaker 2: that
Speaker 2: they are experts in their own field. And so when
Speaker 2: you listen to too many experts, what you then end
Speaker 2: up with is far too much information that you need
Speaker 2: to be able to digest. The simplest thing that you
Speaker 2: need to remember is that
Speaker 2: over the long term the stock market will grow, right?
Speaker 2: That is just a feature of capitalism that the stock
Speaker 2: market will grow. Companies will find ways of generating profits
Speaker 2: for their shareholders and they will do whatever they can
Speaker 2: if they are dividend paying companies. The last thing they
Speaker 2: want to do is to cut the dividend.
Speaker 2: The last thing they want to do is to withhold
Speaker 2: that dividend.
Speaker 2: They want to carry on paying that dividend. And there
Speaker 2: are some companies out there which we call dividend aristocrats.
Speaker 2: And these are companies that have been able to either
Speaker 2: maintain or to grow their dividends over the last 25 years. Right?
Speaker 2: And if a company is able to grow its dividend
Speaker 2: over 25 years, can you imagine what has happened to
Speaker 2: the share price over the 25 years
Speaker 2: it has actually gone up at the same rate. And
Speaker 2: so consequently look for those kind of companies, they do exist.
Speaker 2: I'm not here to give you stock specific tips but
Speaker 2: there are companies that fall into that dividend aristocrat google
Speaker 2: that and then you'll be able to find those companies
Speaker 2: and you'll go
Speaker 2: wow those are the companies that I want to invest
Speaker 2: in over the long term and I don't ever want
Speaker 2: to sell those shares.
Speaker 1: Lots of rules of thumb from David today you have
Speaker 1: to invest and the sooner the better in your investment
Speaker 1: portfolio depends of course on your age
Speaker 1: and that inflation will eat away the value of your
Speaker 1: money if you don't do anything about it. Thanks so much,
Speaker 1: David for your
Speaker 2: thank you. Thank you so much.
Speaker 1: We hope you enjoyed this episode of money talks. My
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Speaker 1: I find out how he's planning to do that. The
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Speaker 2: Mhm