Thursday, 6 September 2018
Buy Term and Invest The Rest? Aspirational or Competence?
We often hear this being parroted:
Buy term (insurance policies) and invest the rest.
Is what you say backed up by competence as in actual track record of "earning more" in your investments?
Or is it just another "aspirational" statement like that "every school is a good school"?
If all you did is to voluntarily contribute to CPF, and/or transfer money from CPF OA to SA, eh... How is it any different from buying Wholelife and Endowment policies? Isn't it same same? A kind of "forced savings"?
(Snake oils out there, don't say I never support you people. Recognise me in the streets remember to buy me coffee OK?)
To be clear, there's nothing wrong with what doing you. However, if you like to "Indian Chief" your financially clueless, but happily living in the present friends, better pray they don't get serious and do a "trust but verify" act on you!
Face is what others give you; embarrassment is what you bring onto yourself.
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Hi SMOL,
ReplyDeleteFor certain income group, I do think they will do better with term by focusing on the savings aspect.
Assuming both 30 years old parents working with two young kids in child care and taking public transport, spending mthly insurance of $400 & take home pay of $5600 (exclude CPF is $7000), make a guess what is their likely mthly expenditure? My estimate is $4100 and this leaves with a savings of $1500 (excluding if they need to give financial support to their parents). If they go for wholelife, they have to fork out $400 mthly more and reducing savings to $1100 (26% of savings). 1 bird in the pocket is better than two birds in the bush that i can only capture in 20 years' time & meanwhile still need to feed these birds.
AT_AT,
DeleteWe are pretty much on the same page here.
Except maybe the part where we think what's "good" for others ;)
I prefer to speak for myself and what I would do; certain income group can easily become certain social economic class or certain educational levels... Then I'll be letting others tell me what to do :(
One big daddy is enough :)
Using your example above, if the couple don't use that $400 per month to buy wholelife, it definitely makes sense to "save" this $400 per month as an opportunity fund for investments if they are financially savvy when it comes to "earn more".
Or use it as a "save more" emergency fund instead if they are not interested or competent in investing. Children and parents may get sick; retrenchments and job redundancies are real.
My poke is what happens when the same couple "monkey see monkey do" voluntarily contribute this $400 per month to CPF?
How is it any different from your wholelife example of bird in hand is better than 2 in the bush?
Wink.
Agree, same same.
ReplyDeleteMajority has significant wealth already under fixed asset called house that depends on govt policy, why put more into CPF voluntarily which is also subject to policy chg. Need to spread the risk lah.
AT_AT,
DeleteIf our HDB flat and CPF combined makes up more than 50% of our networth, we can shout financially free this, financially independent that; the reality is someone got us by the bxlls!
LOL!
temperament,
Delete2 assets are domiciled outside of Singapore. 1 in Asia; 1 in Europe.
If I need to "run road" fast and get out of Singapore, I can survive for a few years overseas until I got a new job to start afresh.
Assets and savings denominated in 4 currencies.
I'm doing it fulltime remember?
Its run like a nano hedge fund or family office ;)
P.S. Actually I see younger investors who don't know what cannot be done doing it too.
If you buy stocks in US, Japan, Europe, or HK, you already got exposure to assets denominated in other currencies ;)
temperament,
DeleteIf the foreign currency is opened with our local brokerages or banks in Singapore, then its diversifying in terms of currency risks.
To have money physically overseas meant exactly that ;)
Its like that sailor thing where we have a girl at every port. So when we travel overseas, we don't have to bring the wife along... Shh...
LOL!
Eh, unless you are thinking of emigrating one day or have the fear SGD will collapse in your lifetime, don't ownself frighten ownself OK?
Big daddy is still focusing on "earn more". That's reassuring!
If the day comes when big daddy only knows how to "save more", I think that's the time to panic!
temperament,
DeleteLOL! You think too much!
In the long run, we all die... So does that mean you don't have to live today?
You have to get your time frame right first.
Beginning of the year, USD was super weak against EM currencies. Now its the reversed. Its about portfolio rebalancing and hedging.
Your USA portfolio must be outperforming STI right now? SGD has weakened against USD since beginning of this year. So you complain what?
But its useless since you'll see them reversed again as you are stuck in your "buy and hold" mode.
Don't come cry to me; you know I'm not a fan of "buy and hold" ;)
You are the problem; not the markets.
See, never read your history lah!
Since 1400, the reserve currencies have passed from Portugal, Spain, Netherlands, France, Britain, and US today.
The most recent one was the transition from British Pound to US Dollar. You were born around that time after the war. You have lived through the "then what". You tell me!
Some other country or countries (SDR?) will replace the USD as the world reserve currency one day.
If I live long enough, I may experience it. You? I don't know... LOL!
As for Singapore, history tells me no country will be strong all the time. Its about cycles again. One day, when no one wants to emigrate to Singapore, we'll be laid back like Malacca.
Remember the Straits Settlements? That time, Malacca was the big brother of Penang and Singapore ;)
You funny. So you want SGD to be weak?
Very easy. Let SGD and MYR become 1 to 1 again see you happy or not!
Its not about we happy or not.
If we see our big daddy making all the wrong moves, and Malaysian big daddy making sound economic policies, then let's talk less and start hedging by buying Malaysian shares and properties ;)
And some Malaysians did exactly that in the 70s when they saw SGD and MYR diverging ;)
Who we are today is the result of decions we did or did not make yesterday.
temperament,
Delete1. You and your HP shares...
This company has created quite a few millionaires for its employees. Either through management buyouts, stock options, or through former managers/employees striking it out on their own to be suppliers to HP ;)
2. That's why we poke fun of yield hogs! Those Malaysians who took the opposite side of your trade by putting their money in Singapore's FD even though the interest rate is much lower has come out on top over you ;)
3. Imagine how the "trusting" Malaysian who had voluntarily contributed to his EPF in the past 30 years, attracted by the higher interest rates, would now feel after finding out his next door neighour had instead transferred that same amount of Malaysian Ringgit into Singapore FD "stupidly" every year for much lower interest rates...
4. Well, who can tell the future that Singapore in the next 30 years will be like the past 30 years? Where unsure, having liquidity helps ;)
If I invest in a 30 year US or SG govt bonds, at least I can sell anytime I want, if I needed the money fast! And if I brilliant or lucky enough, might even make capital gains when central banks restart QE again!
But then, for a mere 1-2% extra, it seems there are people who are willing to lockup their money until age 55. They must be better at forecasting the future than me!
They don't need liquidity.
5. If you B&H&S, then you talk withholding tax for what? You have this habit of saying things that you do the opposit in real life ;)
Slippery eel!
temperament,
Delete1. So you fell asleep at the US market. Makes sense as you didn't "actively" buy them; they were "gifted" to you like our Singtel shares ;)
Either that, you were told to buy by your company!
Who cares about dividends tax? Come to think of it, who cares about dividends!? If only you had bought Amazon or Apple way back instead ;)
I care about capital gains first; dividends bonus (John Neff's Growth and Income).
Yield hogs only care about dividends; everything else its just a flesh wound!
LOL!
2. I'll be patient. I just using EPF as an "example" to poke at those who "voluntarily" contribute to CPF for that 1-2% extra.
EPF interest rate is a lot higher than our CPF, so imagine a Malaysian who did that when MYR and SGD was 1:1 back in the 70s. Ouch!
Yes, even "savings" can become a speculation when we got it "wrong" :(
"Wind water alternate", I wonder what happens when MYR and SGD goes back to 1:1 in 30 years' time?
I hope I am alert enough to have invested in some Malaysian stocks or properties!
Maybe I already migrated there ;)
Malaysia boleh!
temperament,
Delete1. We all can be millionaires too if we can go back time to undo the decisions we had or had not made ;)
2. OK... I hope that made you feel better about yourself about having a FD in Malaysia. Well, that's the price to pay for being a yield hog...
Thought you made more money with the higher interest rates, but in reality lost a lot more through the exchange rate conversion :(
Lucky yours is a small amount. You should see those Singaporeans who invested in emerging countries' properties feel right now looking at the "ugly" exchange rates now...
3. Let me guess. You have ZERO 10 baggers?
Climbing up the mountain, I need to grow big. Capital gains were key.
Climbing down the mountain, I can rely on dividends to pay for my lifestyle as gravity is now on my side ;)
You did the reversed, didn't you?
4. Well, you better hope HP will not become the next Kodak, Nokia, Blackberry, Creative, NOL, or even SPH!
Why would you need the money now after holding HP for ages? Unless you found yourself a mistress!?
I tell your wife!
LOL!
First time I know smol u so many assets myhahahaha
ReplyDeleteSo sad, I can only pray to tian gong nothinh happen to Singapore. Everything is here hahahaha
Sillyinvestor,
DeleteI follow Xiao Ma Ge in A Better Tommorrow ;)
A dollar in this flower pot, another dollar at the other flower pot...
Very nano scale.
LOL!
That's excellent policy design!!! I would do the same if it were up to me too ;)
80% of Singaporeans are in your shoes.
Everything here in Singapore. HDB, CPF, Singapore stocks/ETF/bonds, Singapore savings accounts; etc.
So when an invader comes again, I'll be certain at least 80% will be still around and have not taken the first flights out of Singapore ;)
Don't sabo me by asking where is SMOL OK?
There's a reason why the old wealth families don't have every family member physically domiciled in the same country.
And why when my previous company's top management fly, they are never
placed on the same flights ;)
I watch and learn from what others DO; I'll definitely not pay money to listen to what others SAY.
Any idiot can say whatever they want!
temperament,
ReplyDeleteYour time no internet so lagi harder to make "trust but verfity" comparisons mah...
There are people in your generation who will reject Term as these policies don't return your premiums back...
Like flushing money down the toilet. That time few travel overseas so who got heard of travel insurance?
How's that for flushing money down the toilet if you came back safely? LOL!
How wholelife and endowments policies were sold in your time?
The snake oil spin that you get all your premiums "back" if you don't die is so appealing to bei kambings who can't count!
We only need life insurance when we have dependants!
No dependants buy life insurance for what?
Snake oils must be good if they can sell life insurance to those with no dependants! Its like selling ice to eskimos!
Respect.
Hi,
ReplyDeleteThis is the motherhood statement. Different individuals have his/her own way of comprehension.
Ben
1) Ben,
DeleteYes, its like me saying I blog to help bring about world peace!?
LOL!
2) temperament,
You may want to google what does motherhood statement means ;)
Ben is spot on that everyone have their own way comprehension ;)
And you have to volunteer as the living example!
temperament,
DeleteI am relax; just amused.
That's what "talking male-chicken" is all about ;)
You veteran and regular here so I don't use sugar-coating when I talk to you ;)
You know I respect you, don't you?
In the sea of graduates, we two are the few representatives for ITE and O'level school leavers out there in this community.
We do contribute by providing alternative voices to the mainstream view like the 2 dots in the Tao symbol ;)
We are making CW big-headed. I too do not have a single 10 bagger stock :(
At trading account level yes; just not at single stock level.
Which shows how difficult it is to achieve!
temperament,
Delete$1 has turned into $11 in 5 years:
My First Down Year
Of course you are not lagging behind! You own a 2nd private property remember?
How many ITE can do that?
You win!
temperament,
DeleteCome to think of it, how many graduates can achieve what you have achieved?
Eh! We just exchanging pointers OK? Its not a competition.
Don't go "lao hero" and start to swing for fences just to prove your peacock is bigger than mine!
At our age, capital preservation (keep pace with inflation) is already for the win!
Double or triple your networth so what? Unless you want a third mistress?
I've guessed right.
Your dividends strategy works; it just takes a long time. Great for those who are patient and not in a hurry.
I started with $500 per month salary. A save more and let interests compound strategy would fail on me.
I no choice have to focus on Earn More ;)
Different strokes for different folks!
temperament,
DeleteHee, hee. That's good!
I remember this Wang Sha joke:
Young men can tahan pee; anger cannot tahan.
Old men can tahan anger; pee cannot tahan!
Peace be with you.
P.S. Now we wait for CW to come back to see if there's anything we can poke. What are friends for?
temperament,
ReplyDeleteYou finally got my poke!
I was thinking this "bo tak chek" is again misreading and putting words into my mouth...
Face-palm.
LOL!
You har!
Smol,
ReplyDeleteU are really the "Piak" type during your "younger day". It's amazing that you could let go of the "high" pay at the age of 44. I believe that not many can do it especially for those who do not have a degree or diploma.
Ben
Ben,
DeleteOnce I discovered I had "enough", the rest was easy.
I often hear regrets from well off successful people wishing they had spent more time with their parents... AFTER they were gone.
I can wait; mom can't.
I'm glad I made the decision to return home early.
Mom developed glaucoma after my return. She would have gone blind if we had delayed the operations. She has lost her peripheral vision though; still better than totally blind!
That year was crazy. We did laser, then cut a tiny hole in her left eye, to installing a small apparatus thing in her right eye, the works!
From 3 times a week medical appointments to weekly, to monthly, to every 6 months, and now finally to once every 9 months. Phew!
Its was much easier to send money home when I was overseas!
That's how I realised first hand why parents buy their children expensive gifts or give them a generous allowance; its to compensate for the guilt in not being around most of the time...
How to lie to myself and move the goal posts?
temperament,
DeleteYou want to know the real reason why I work weekends?
I so "filial" until I can't take it anymore...
Lucky got siblings support. If I only child I think I'll go mental!
Crash got sound stumbled on to the current arrangement where my other sibling comes to my place during weekends; I can finally have my days of "rest" working Saturdays and Sundays ;)
I'm bemused when I see others trying to use FIRE to escape work...
Wait till they discover work can be a great stress reliever and "escape" from home!
LOL!
;)
DeleteTotally understand how that feel. For me, rest is a understatement, is escape and lifeline to me. Lucky that year my class sweet. Ahahahaha
DeleteSillyinvestor,
DeleteIt was tough on you too.
You had to juggle between career, your own family, and your parents.
Singapore is ageing fast. Our stories are not isolated cases.
Its the cycle of life.
Hi Jared,
DeleteI will bless my good luck if I had a son like you who is willing to make the career sacrifice to look after me (personally, I don't want any family members to do that for me), if that day should come. Among the people I heard of who quit their jobs to look after a family member, none of them did it at the peak of their career. Quitting a successful career to become a caregiver is a huge sacrifice. As a parent, I will also feel somewhat guilty. Although I am not that old, I can imagine many old, retired people don't feel good about burdening their family members. The last thing I want as a parent is to hold back a successful son.
Did you call yourself Man of Leisure to hide the actual reason from SMOL mama that you did it for her, so as not to make her feel bad?
hyom hyom,
DeleteDo what comes naturally.
And do be mindful that you don't paint yourself into a corner as they are many things we have no control over...
Especially with all these talk about sacrifice, burden, guilt...
I believe children have their own karma; we have ours.
We need not "over plan" our children's future; neither should we have too much "expectations" what our children "should or should not" do in our old age or when we are sick.
I think you know what say me between the lines ;)
Hello, mom don't surf the internet lah!
I decided on Singapore Man of Leisure as it would be easier to "grasp" for most readers who are channel 5 oriented.
As for Singapore Flower Monk, channel 8 readers like Sillyinvestor would appreciate better.
They are the "same" in essence ;)
P.S. From our blog mastheads, we can tell who are the numerical biased ones, who are the literary oriented ones ;)
Hi Smol,
ReplyDeleteDue respect to you. The soft part of smol. You are right. Time waits for no one. The best time is now!
Ben
Ben,
DeleteYou too have stumbled on to the "balance" when it comes to discovering your "enough".
On one side of course we need money. Spine not strong cannot stand tall.
But most financial freedom seekers are clueless on the philosophical or spiritual other half...
If have no clue WHY we get up in the mornings, well, good luck!
Hungry eat; tired rest.
Got money play; no money work.
Get the philosophy right, we don't need to get too stressed about money ;)
Smol,
DeleteIt's the matter of knowing how much is considered "enough". To some, $1million is enough. To other, the same amount is not enough.
Headache, man.
Ben
Ben,
DeleteNo headache once you've found your "balance" as in "enough".
Trust and listen to your inner voice ;)
Hi Smol,
DeleteYou are right. The inner voice provides the guidance on what needs and has to be done. I believe that the inner voice reflects the true desire of one to make the appropriate decision as his/her wish.
I have been enlightened to another level. Many many thanks and appreciations to the guru master like U. :)
Ben
Ben,
DeleteNo guru me please.
You walk your own path; I walk mine.
We are fellow journeymen who met on the road and shared pointers, then we move on ;)
Smol,
DeleteRight. We are fated to meet coincidentally on the road. You are one of the few "humorous" one whom I met in my ongoing journey. Nice!
Ben