Invest Fair 2017: Investing in 20s, 30s and 40s

I was invited as a panelist to share my investing experience at Invest Fair 2017 at Suntec Convention Halls last Sunday, together with Jes (SimplyJesMe), Brian (ForeverFinancialFreedom) and Alison (Heartlandboy) and Mark Cheng (Moderator from MoneySmart). The topic given is Investing in 20s, 30s and 40s, and looks like I was invited to represent the 40s and retirees because the other 3 panelists are in 20s and 30s.


We were given a set of questions for the penal discussion. I think it is good to share My view and My Experience here as many of you do not have chance to attend Invest Fair last weekend.




Investing varies at different stages in life. How would you describe the differences of investing in 20s, 30s and 40s?


  • In general, I would love to split into 2 different strategies: Wealth Accumulation (early stage) and Wealth Preservation (retiring stage). The portfolio is different with different asset classes, allocation and risk profiles. In the early stage where wealth accumulation is the focus, one can have higher allocation to higher risk type of asset class which give high capital appreciation and growth like equities or commodities.
  • In the retiring stage, capital preservation has to be key focus whereby higher allocation to income producing assets like Bonds, Dividend Stocks or REIT (Real Estate Investment Trust).



Investing in 20s:

As most people just start to get in touch with investing, how should one educate themselves on investing and the fundamentals of financial planning?


  • In general, I find that there is a lack of financial literacy in Singapore. If given a chance for me to start all over again after I graduated from the university, I would like to find an experience mentor to guide me on the Life Stage Financial Planning Process and invest in myself to equip myself as much financial knowledge as possible. I have wasted the first 15 years since graduation losing money investing into something I don’t understand like Time Shares, Land banking, oversea properties, Singapore S-chip, Singapore blue chip (Creative Technology, Chartered Semiconductor, etc).. Basically I have wasted my previous time and my money doing trial and error and give hefty tuition fee to the investment world.
  • In summary, I would suggest the following:
    • Attend financial planning classes which is not taught in the school. Start early and start with right knowledge. Learn as much as possible before investing your first dollar into anything including insurance, endowment, ILP, all sorts of investment products.
    • Get an experience mentor who have lost money before… not the mentor who tell you how to make money easily and sell you the dream.
    • Don’t fall into Get Rick Quick, Retire Early type of investment or trading seminars.
    • Get Real if you want to invest properly. There is No free lunch and you have to work hard for it. Forget about all the free investment tips. Why should people tell you free tips and make you rich? Why don’t they just keep the tips themselves so that they can become millionaires themselves?



What are the type of investment beginner should look at and what is the appropriate amount to start investing?


  • Blue chip Dividend Stocks, REITs, Unit Trust, ETF. You have less probability to lose 100% of your capital.
  • Start Small…. Learn from the mistakes when you lose money. You can start as low as $100 every month investing in Unit Trust and ETF which offer good diversification.
  • Losing money is part of the learning journey. Accept it, learn from it and manage it.



How can one determine the right form of investment when they are just starting out?


  • Understand the products before you invest. Don’t invest in something that you don’t understand.
  • Ask what is the maximum amount you are going to lose if something goes wrong.
  • If you cannot stomach the maximum loss, the investment is not suitable to you.
  • Have a right investment mindset: Prepare to lose everything when you invest. Nothing is guaranteed in the investment world. If you come across any products which give you guaranteed return, READ the FINE PRINT. There will probably have some conditions imposed in the product like hard lock period, penalty on early redemption, etc.



Investing in 30s

Most people would say that 30s is the best time to take risk, what are your view on this?


  • There are always risks in investing. No investment is guaranteed in this world. Risk Management is one of the important skills one should master before investing. Invest in something that you can sleep well at night and can afford to lose.  A sole bread winner in 30s who needs to support his / her family, children, elderly parents without any insurance protection is not suitable to invest in risky asset classes with lock in period. Everyone’s risk tolerance is different at different life stages.


What form of investment should someone with prior investing experience consider at this stage?


  • Go for something liquid with no lock in period as there are a lot of uncertainties at this stage of the life. E.g. Marriage, Child birth, purchase house, taking care of elder parents, stress in career, setting up own business, etc. This tests your money management and risk management skills as one have different roles as Parents, Children, Spouse, Boss, Employee, etc.
  • If something goes wrong, one has the flexibility to liquidate your investment and re-deploy your resources to something more important and urgent.
  • Summary: Focus on Investment Risk Management in terms of Liquidity & Flexibility.


Is there any precaution one should as there many huge expenditures occurring at this stage in life such as marriage, purchasing houses, childbirth etc.


  • That’s where the Personal Financial Planning is very essential at this stage of life. I learn this financial planning process through my real life experience. I wish I have learnt this through a proper financial planning course at early age to avoid making unnecessary mistakes and wasted money to rectify those mistakes. I paid for unnecessary insurance premium, paid unnecessary interest to the banks, and even at one stage my wife had to borrow money and sold her gold jewelries to raise cash as we faced short term cash flow problem due to over leveraging of loan.
  • I shared some good financial planning practices here (very important to plan in sequence):
    1. Set aside minimum 6 months of emergency funds
    2. Get yourself and your family well protected for any unforeseen event like death, accidents, critical illness, hospitalization, lost of income due to disability, etc. If you don’t have sufficient insurance protection, your investment will be very vulnerable. E.g. One critical illness medical expense can wipe out your whole life saving / investment or even cause financial burden to your family. Be responsible and don’t pass your liability to other family members.
    3. Only invest your excess money after you have done the above 2 steps.



Investing in 40s

This is the stage when we are reaching retirement age, how should this affect our assets management and investment portfolio?


  • We have to prepare for loss of jobs and reduce in income.
  • We also start to visit hospital or clinics more for ourselves and taking care of our elderly parents. Hospital will probably one of the most visited places for the rest of our lives from now onward.
  • As there is no certainty of our income and also we are not able to anticipate what will be the medical expense which may shock us, Capital preservation is the top priority. We just cannot afford to lose our hard earned money from the past 15-20 years. One wrong investment mistake will wipe out all our saving and we don’t have time and energy to recover.
  • This is the age we have to be defensive in our investment and avoid dreaming to chase for higher return if you cannot afford to lose your retirement capital. Thus, I would suggest to have higher allocation to Income generating Assets like Dividend Stocks, REITs and Bonds, non stock market correlated type of Multi Asset Classes (e.g. air craft leasing, solar farms, invoice financing, healthcare royalties, mortgage financing, re-insurance premium, student accommodation, etc)


What are the factors one should consider to ensure they can retire promptly?


  • Protect your capital at all cost. This is not the time to chase for additional returns.
  • Portfolio should be defensive in nature and lower volatility through a very well planned diversification across different asset classes with minimal correlation.


How can one finance for the next generation?


  • Estate Planning is important if you don’t want leakage to your assets. It is no point you have spent your whole life accumulating your wealth but you do not plan for a proper hand over to next generation.
  • Our Estate does not equal to our Asset when we pass on because we may pay more taxes, legal fee, or we have to liquid our investment at the wrong price (e.g. market crash)



What other advice can you provide to the audience with regards to investing, regardless of their stage in life?

  • Focus on Financial Education, it is a life long journey as there are many complicated financial instruments out there. We have to understand Pro & Cons different types of asset classes and how they generate returns. If the product is too good to be true, it probably it is.
  • Choose investment which is suitable to you (ie. can sleep well) but not only looking at the return.
  • Learn how to differentiate investment scams and genuine investments. Some common traits of the investment scams:
    • Low investment amount to participate
    • Offer High Returns
    • Posh Marketing website and seminars at the hotel
    • You can make additional money by referring your friends and families.




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Backtesting Result on my REITs Selection Criteria

I was very excited to learn the back-test result on my REITs Selection criteria by Christopher (blog owner of Growing your tree of prosperity). I will definitely catch up and learn from him his unique backtesting strategy. This will definitely help me to improve my REITs portfolio performance.

See my post on  3 Investing Mistakes for Singapore REITs at Investors Exchange by BIGScribe here.

I shared his backtest result here. You can find his original post below.

Deep REIT investing insights from Investors Exchange 2017

Sometimes, the good stuff needs to wait until after a seminar is over.

As speakers in BIGSCribe events are also investors, we are also part of the audience when someone else is speaking.

Kenny Loh or Marubozu gave a fantastic presentation on REITs investing and runs a course here. Here are the results of my back-testing to refine my own REIT investing strategy using the insights I learned from Kenny Loh’s Three Musketeers approach to REIT investing. Paying customers would already have some sort of quick tutorial on what semivariance is from my presentation.

a) Baseline – buying all REITs at one go

If you buy all 41 REITs in equal proportions, your returns would have been 8.5% with a semivariance of 13.67% for the past 10 years. This is our baseline and I recommend that every investor who might not want to go too deep into screening should just buy all the REITS in SGX in equal proportions.

b) Choosing REITs with the highest Yield 

As I have spoken in my own presentation, buying half of the higher yielding universe of REITs can outperform the strategy of buying all the REITs in the SGX universe. Last time I backtested 9.64% with a higher semivariance of 14.25%.

c) Choosing REITs with the lowest Gearing

Kenny spoke about looking for REITs with a lower gearing. I backtest a strategy that buys half of the REITs in SGX with a lowest debt to equity ratio. Once again, I was able to outperform at 9.56% with semivariance of 13.98%.

d) Choosing REITS with the lowest Price to Net Asset Value

Kenny spoke about being careful when looking for REITs with a high net asset value. I backtest a strategy that buys half of the REITs in SGX with a lowest pice to book ratio. This time I underperformed at 7.28% with semivariance of 15.08%.

Attempting to buy a dollar worth of real estate with 99 cents actually backfires on the investor with lower returns and higher risk.

e) Super-duper REIT screening strategy

So thanks to Kenny, there are at least two working strategies. Find REITs with a high yield and low gearing. I combined both screens, searching for the top 50% highest yielding REITs and then within that set, short-listing 50% of those with the lowest gearing.

This time I had a winning strategy in my hands. A final return of 13.16% with a semivariance of 14.49%. It has a fairly high Sharpe ratio of 0.54.  1 in 40 years, you may lose about 16% of your portfolio value, making this something which may be amenable to 200% leverage.

What is the moral of the story ?

When investors get together and mutually present seminars, our insights are silo-ed and we might not be able to extract the maximum benefit if we stick to our own investing approach. Even my 6-8% strategy returned only 10%.

Because I always make sure that I follow up on my learnings from other speakers, the blogosphere can benefit from a much sharper insight that combines the investment ideas of several speakers.

[ Note : The Singapore REITs universe is small, applying a screen to choose a quarter of sticks in the universe will only yield about 8-11 stocks. A diversified investor will need a few different strategies to build a portfolio that can withstand the test of the time. ]



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