What would be the traits of the smart investor? Is there a secret recipe that people can follow to become one?
Boasting speakers with years of experience within the financial markets, The Association of Banks in Singapore (ABS), MoneySense and Securities Investors Association (Singapore) (SIAS), hosted the 10th year of My Money Seminar on 16 November 2021. By having an experienced line-up of speakers, we went down to the seminar (using more than 900 others) to choose the brains of those investment professionals to uncover the secret recipe to smart investing.
Here would be the 8 ingredients for smart investing.
# 1 Monitor & Remain on Surface of Your Investments
We need to monitor the investments that people make.
David Gerald, Founder, President and CEO of SIAS, shared that purchasing today's fast-changing economy would require us to remain on top of our investments. This means making sure that we all know what's in our portfolios, the way the investments are performing and whether we have achieved our investment goals.
We first have to stay informed being an investor and understand our rights and responsibilities as an investor.
There are many ways we can do that. We can consider and understand more about the disclosures shared by the companies we invest in. We can also attend Annual General Meetings (AGMs) for more information about the companies' plans and raise questions at the AGMs.
# 2 Always “Ask. Check. Confirm.” before Investing
Avoid buying impulse, herd instinct or on name familiarity.
Ong Chong Tee, Deputy Managing Director of the Monetary Authority of Singapore (MAS), spoke from the requirement for retail investors to consider control of their investments.
“The term My Money implies taking one's responsibility for one's finances. Retail investors must know their very own risk tolerance, return objectives and comprehend the potential products to invest in. Three important enablers for those market participants to experience their roles effectively: 1) a culture of fostering rely upon the financial industry, 2) strong market discipline that incentivises the best behaviour, 3) adequate and timely disclosure of fabric information.”
Ong Chong Tee (MAS) giving his keynote address on “Strengthening Trust In Our Capital Market”
So, we should avoid investing on impulse, due to herd mentality or due to name familiarity. Instead, we should aim to construct a diversified investment portfolio which is aligned to our risk profile and comprehend the issuer and also the product before investing in them. Also, investments which are relatively simple to access, such as products sold through ATMs, are not necessarily low-risk products.
The best way to protect ourselves as investors is to beef up our financial knowledge. MoneySense runs regular programs to assist investors gain financial knowledge and learn how to spot investment scams. No one should go into an investment simply because it promises a high return. Mr Ong urged everyone to continually “Ask. Check. Confirm.” before investing in an investment.
You can find out more about the best way to protect yourself from investment scams within this video.
# 3 Start When You Are Young
Starting young provides for us more years in the market to ride out market volatility and also to benefit from the advantages of compound interest.
Compound interest rates are interest earned along with interest already earned. If you start early, your investments will be able to compound, and grow significantly, on the extended period period.
You should save before you invest. You should also ensure that you have enough emergency funds for rainy days. So, begin saving when you are young to provide you with the financial flexibility to begin investing early.
# 4 Don't Be Greedy!
The main aim of investing is to generate more returns over time. However, we should never be greedy with regards to growing our wealth.
This was the main point produced by Ho Kwon Ping, Founder and Executive Chairman of Banyan Tree Holdings as well as Founding Chairman of Singapore Management University (SMU).
He shared that investing is about incrementally increasing our wealth, to ensure that we are able to still pursue other passions in everyday life.
When we invest, we ought to invest wisely, as it is hard to consistently beat market returns. When we invest with the hope of creating a windfall, we might wind up losing a lot more than we can afford if you take excessive risk.
Michelle Martin (MONEY FM 89.3) inside a fireside chat with Ho Kwon Ping (Banyan Tree Holdings and SMU)
# 5 Take a look at Financial Well-Being Regularly
Health is wealth.
Taking the steps towards financial wellness is just like how we would do something to ensure we are in good physical health. This is exactly what Han Kwee Juan, Group Go to Strategy and Planning at DBS Bank, shared with the audience.
Panellists discussing topic “Advancing investors' interest – also can be achieved?”, moderated by Michelle Martin (MONEY FM 89.3) (L-R) David Gerald (SIAS), Chew Chin Yee (SGX RegCo), Han Kwee Juan (DBS) and Jeremy Goh (SMU).
When we take care of our overall health, we make sure we eat correctly, sleep well and use regularly. Similarly, with regards to financial wellness, there's also three things we ought to do regularly.
First, we have to manage our debt obligations. We should attempt to pay off debt as much as possible, beginning with individuals with the highest interest rates, for example credit card debt.
Second, we have to make sure that we protect ourselves and us. This means putting aside a minimum of 6 months of emergency cash to help us tide through financially difficult times. We need to make sure we have purchased the right insurance coverage that offer for damages or healthcare expenses that we may incur. We also have to plan for our family's long-term future, by first planning for our own retirement and for some, likely to leave a legacy.
Third, we have to review our investments regularly, keeping in mind the reasons why we invest. Shall we be investing to grow our wealth, to prepare for any comfortable retirement or are we investing for our children's education? We ought to also ensure that our portfolio is on the right track to satisfy our investment goals.
# 6 Remember Your Long-Term Strategy
Investing isn't a “get-rich-quick” scheme.
Christopher Tan, Executive Director, MoneyOwl and CEO, Providend, highlighted the significance of riding out market volatility in the long run. Investing in the future permits us to weather through market downturns and years once the markets are down.
Everyone has their very own money equation, where our income becomes savings as we take away the fixed and variable expenses. Christopher shared the money equation to demonstrate the practical ways in which investors may take control of their own finances. This includes increasing our income, cutting down on our expenses and eventually having more in savings. They are factors that are under our control, unlike the movements from the market.
Lastly, he also pointed out that short-term information shouldn't change our long-term investment strategy. However, short-term information might help point us towards the right short-term decisions.
# 7 Optimise Your CPF Account
Many people make an effort to retire comfortably.
When you are looking at retirement planning, Christopher shared that one from the first things Singaporeans need to do would be to check if you have topped your CPF. He shared that CPF should be the first instrument to check out to create your retirement safety net as CPF LIFE provides for us lifelong income within our retirement.
While the return on our investment is important, the toughness for our income stream during retirement years is much more important and we need to preserve this income. Christopher elaborated that once we've reached the Enhanced Retirement Sum ($264,000 by 2021), additional cash we have can then be employed to purchase different instruments.
Loo Cheng Chuan, a strong advocate for using CPF to develop a retirement portfolio, shared that the aim ought to be to top-up our CPF as much as possible, so that as early as you possibly can. This helps us to reach the cap for our Full Retirement Sum early, which will continue to develop with time to help us form our financial safety net.
He also distributed to the crowd some tips on how to maximise their returns both in CPF Special Account and CPF Retirement Account.
Panellists discussing topic “Managing your money in today's global economy – what to consider?”, moderated by Michelle Martin (MONEY FM 89.3. (L-R) Geoff Howie (SGX), Terence Wong (Azure Capital), Christopher Tan (MoneyOwl and Providend), Chan Fook Leong (CFA Society Singapore), Loo Cheng Chuan (1M65 Movement) and Song Seng Wun (CIMB Private Banking).
# 8 Discover Your Financial Health Status
How healthy are you, financially?
While we may come with an investment strategy, we should regularly review our portfolio to ascertain if there is any gap that should be bridged. Including reviewing the portfolio if it's on the right track to achieve its investment objectives or make adjustments according to our life stage and requires.
At the event, attendees were able to do Financial Health Checks (FHC) and have one-on-one consultations at financial health clinics. They were also in a position to discuss their customised FHC recommendations and obtain financial guidance on how to enhance their financial health.
If you weren't in the event but would like to discover your present personal finance status, you can still bring your FHC on MoneySense website. All it takes is a click and A few minutes to accomplish the FHC.
Participants find out how to improve their financial health through Financial Health Check and one-on-one consultations at the Financial Health Clinic.