Author Archives: administrator

How to start investing?

Some readers upon reading from our site Tri-O Retirement Plan are keen to start investing for retirement planning. There are quite a few instruments which can provide regular retirement income as listed in our INVESTMENT page. For this particular blog, we will cover investment in Mutual Funds or Unit trusts. One advantage for this instrument is that many financial institutions or platforms allow investment in mutual funds using Regular Saving Plan (RSP).

RSP is suitable for busy executives or employees. It automates the purchase of investment products on a monthly basis. For busy executives, it is almost a “set up once and forget about it” type of operation. The other advantage is it enforces the discipline of investment over different market conditions. We, as humans, tend to get emotional when market goes up or down and may end up buying high and selling low (which is bad). RSP helps remove this need to make any buy decision in the accumulation phase and hence provides diversification of investment over time.

On our INVESTMENT page, we spoke about having an INCOME PORTFOLIO and GROWTH PORTFOLIO in INVESTMENT “O”. We recommend using RSP on large mutual funds which provide regular dividends for the income portfolio and RSP on high growth thematic funds for the growth portfolio.

The specific mutual fund or ETF to invest in will depend on which country you are from and which financial institution you trust your money and investment with. There is also a currency decision to make based on the country you are from as some mutual fund or ETF may or may not offer them in your country’s currency.

Using Singapore as an example which we are from, there are many options that we can choose from. Most financial institutions in Singapore allow investment in mutual funds using RSP and the RSP amount can start with $100 per month. You can choose from pure equity funds, bond funds or balanced (consists of equities and bonds) funds. They have different characteristics on how they fluctuate with the market and dividend they provide. Using the funds selector from your financial institution, you can pick up different attributes of funds that you are interested in.

These are some examples of balanced funds.

We like funds from large asset management companies like Blackrock, JP Morgan, Fidelity, Goldman Sachs, Vanguard etc and large fund sizes (at least $1 billion of AUM – asset under management). Look for funds with lower annual expense ratio so that it does not erode your dividend or growth of the fund.

These are examples of equity funds

And these are examples of Bond Funds

The above funds (balanced, equity or bond funds) are good to be considered as part of your INCOME PORTFOLIO of your INVESTMENT “O“. Assuming you have more than $300 per month (in the context of Singapore) allocated to the income portfolio of your INVESTMENT “O”, you can look at buying three funds, one from each category, to spread out your risks as well as to learn their different characteristics. For eg, a bond fund tends to fluctuate less than an equity fund. It means it will not go down as much in value in down markets but of course, it will not gain as much in a buoyant market.

We are not recommending any specific funds but provide broad categories that you can consider. Do some research from your financial institution websites and read the fund fact sheets. Please do take note that your financial institution may layer in a sales charge for any funds bought. The sales charges are usually lower for funds that you can buy online, without going through a banker or sales person. Look for a financial institution or platform that you are comfortable with in terms of security, customer service and charges. Please spend time doing your homework instead of relying solely on bankers or financial product sales people. They will tend to push for products that they receive higher commission and may not have 100% of your best interest at heart.

As for the GROWTH PORTFOLIO in INVESTMENT “O”, you can look at thematic funds. For eg, if you are a big believer of clean energy or autonomous vehicles, there are funds that focused on investing in these companies. When autonomous vehicles become mainstream, your fund may start performing very well. These funds are usually smaller, riskier, fluctuates more widely and do not pay regular dividends.

As an illustration, if your monthly contribution to INVESTMENT “O” is $1,000, you can allocate 80% to INCOME PORTFOLIO and 20% to GROWTH PORTFOLIO. For your income portfolio, you can pick 4 funds (1 equity fund, 1 bond fund and 2 balanced fund) with a RSP of $200 each per month. For your growth portfolio, you can pick 2 thematic funds with a RSP of $100 each per month. This strategy will provide you sufficient risk diversification.

Investment is a big topic. This blog just touches on some basic concepts and possibilities for retirement planning. Subscribe to our newsletter if you are keen to read more blogs in these areas.

TRI-O RETIREMENT PLAN is a simple way to help you get started on your retirement planning. Learn the FUNDAMENTALS and HOW TO GET STARTED. There is also a spreadsheet to help you CALCULATE your monthly savings and your project monthly income at retirement. You can check out our BLOGS on topics pertaining to retirement planning. Feel free to CONTACT US if you have any questions or comments.

Everyone is making money

In social settings, most friends only share their success stories in investing. This may or may not be the full picture.

Had dinner with a bunch of ex-colleagues. Two of them did very well in their careers and are now happily retired. They are both well to do and are private banking clients.

The conversation invariably led to investments and what each of us are doing in terms of investment. Mine is boring, using RSP (regular saving plans) to buy broad ETFs and multi-asset income funds and hence did not share much.

A started speaking about currency pairing and borrowing money in swiss francs to purchase instruments in another currency. It sounded complex. I am trained in corporate finance and it took me a while to understand exactly what he is doing or rather what his private banker advised him to do.

B, whom I know is a risk taker, was sharing about structured products…using loans to purchase bond funds. At one time, she was sharing that she is earning dividends of US$20,000 per month. Basically, her ideal retirement income every month.

I am sure many of us have such friends and social settings like this could be common. Many of us are even tempted by their investment strategies. We are keen to find out how to earn a pretty penny during retirement and participate in them.

Since we knew A and B for more than 20 years, we could also start putting the pieces in place.

A was in the company the longest and benefited from the company stock option plan when it had a big ramp before it crashed (unfortunately, I joined the company after the ramp and did not benefit as much). He bought physical investment real estates and earned a significant amount of retirement income from rental. He is only using a small portion of his wealth on risky instruments. We know that he bought Bitcoin at US$60,000 (it is about US$24,000 currently) and lost money in risky corporate bonds when oil price crashed. In a social settings, he was only sharing “exciting” investments he is making. Boring investments are not good conversation topics in social settings.

B comes from a wealthy family. She is a risk taker. We have no doubt that some of her investments made her good money but we also knew that she lost money together with A on risky corporate bonds.

So while we may be tempted to look for sophisticated investment vehicles to earn us higher returns for our retirement, please be mindful that the higher the returns, the greater are the risks. There is always a common saying that there is no free lunch on Wall Street (or for the matter, anywhere). Please do your due diligence and if in doubt, walk away. Bankers are keen to push sophisticated products to their clients as they make more fees and commissions from them.

Tri-O Retirement Plan is boring. We are proposing that you buy broad based funds or ETF on a RSP (regular savings plan). A good case is you can make 10% per annum on this strategy although we tell our readers that even 5% to 6% is good (assuming risk free rate is 3%-4%). We like it boring and safe.

We proposed two portfolios in your INVESTMENT “O” – income portfolio and growth portfolio. Keep your income portfolio boring and safe. If you like, you can take a portion of your growth portfolio to participate in riskier instruments. You could be one of the lucky ones who bought Bitcoin at US$100 or Apple shares at US$17 (pre split) many years ago and find the next big thing.

Tri-O Retirement Plan provides peace of mind

I didn’t realize that not having a retirement plan can have an impact to our physical and mental health until my meeting with X.

Had dinner with X recently. We are all in our early 50s and we were discussing about health issues. X told me that he had a recent episode of high blood pressure. Although he went for all the health checks, the doctor did not find anything wrong with him. The doctor concluded that it could be due to stress and his lifestyle.

X is an executive in one of the large local enterprise. It was his first job, he rose through the ranks and have been in the same firm for close to 30 years. He was in charge of an important project for the firm and unfortunately the project did not go well. The project over ran both in terms of budget and timeline. It got the attention of the CEO of the firm and the CEO personally reviewed the project on a weekly basis. X was under tremendous stress. He said he woke up at about 5 am every night breaking out in cold sweat. He personally believed that it contributed to his high blood pressure.

X and his wife discussed about quitting the job. X is the sole breadwinner of the family. Both his kids are still in tertiary institutions. They calculated the sums and realized that if they downgrade their house to a smaller apartment, X can have an earlier retirement. X just bought a new expensive set of wheels too.

Being assured that financially the family is alright even if he quits, X could began sleeping fitfully again. He could also manage the project in a calm and objective manner and finally the project went back on track (although it still did not meet the initial timeline and budget). The CEO felt more assured about the project and X was off the hook.

The above episode illustrates that having a good retirement plan like Tri-O Retirement Plan can benefit the mental and physical health of a person. If X has started on a retirement planning earlier in his career, he will have a good handle on his retirement income at any point of time if he chooses to retire earlier. He can also watch his expenses so that additional savings can be ploughed into Investment to further boost his retirement income.