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Money Rules That Will Change Your Life and Give You Financial Freedom — Transcript

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0:00Now even the oracle of Omaha cannot beat
0:03the market. What makes us think [music]
0:05that we are so good to pick the stocks
0:07and can consistently beat the market
0:09year after year?
0:10>> Have you ever [music] invested your CPF
0:12money?
0:13>> Not a single scent. Never.
0:14>> I think most Singaporeans treat CPF like
0:16a tax, like the government taking the
0:18money from you and you won't [music] see
0:20the money until you turn 55. Like why
0:23should I put more money in?
0:24>> Your special account can earn you four
0:26to 5% interest. [music]
0:27>> Wow, that's a lot. And that's
0:28guaranteed. how it's a sin to invest
0:30from a special account.
0:31>> It seems like it's been the best kept
0:33secret. I can't believe [music] that I'm
0:34only hearing about it now.
0:35>> If I knew about this when I was 25 years
0:37old, that $27,000
0:40I put into the country club and I lost
0:42every single scent. I would have
0:44actually top up my special account.
0:45Shulin, you have this last chance to top
0:48up your special account because at some
0:50point in time, you cannot top up
0:51anymore. Now 1 M65 is no longer invoked.
0:54We are talking now about [music] 4 M65
0:57>> in CPF. in CPA.
0:58>> If you were to build a simple investment
1:00[music] portfolio for your average
1:02Singaporean, what would it look like?
1:03>> Just five.
1:05>> Before we start, we would really
1:07appreciate it if you could like and
1:08subscribe on YouTube or Spotify or Apple
1:11Podcasts. And if you find this valuable,
1:13please consider giving us five stars
1:15because it would mean that we can pass
1:17this message on to many more people.
1:19Thank you for tuning in and I hope you
1:21enjoy this episode. Hi and welcome back
1:24to the real reason. So, in the last
1:26episode, Chris shared with us why most
1:28financial advice is designed to make you
1:30feel anxious, not wealthy. And this
1:33week, we're going to just go back to
1:34basics. What to do with investing? And
1:38actually, we're going to start off with
1:39something very basic for Singaporeans.
1:42It's your CPF. What to do with your CPF.
1:45So, let's dive right in. Welcome back,
1:48Chris.
1:48>> Thank you for having me be back.
1:50>> Yes. So, in the last episode, we talked
1:53about financial gurus, influencers,
1:56scams. And this week, we want to go back
1:58to basics, what actually to do with your
2:00money. So, I'm going to ask you, have
2:02you ever invested your CPF money?
2:06>> Not a single scent. Never. I have never
2:07invested my CPF money. I mean, when I
2:10was much younger, I don't have a lot of
2:11CPF money to invest uh uh from, right?
2:14Or I don't have a lot of CPF money to
2:16invest. [gasps] Well, why? Because a lot
2:18of us we use our CPF money from our
2:20ordinary account to pay for the mortgage
2:23of our house. And then when I had more
2:26money in my CPF ordinary account, I
2:29decided not to use it because it doesn't
2:31make sense to use money from your CPF to
2:33invest if you have got cash. You always
2:35start investing from a lower source of
2:37return, right? And cash obviously gives
2:40you a lower source of return because
2:42your cash is sitting in a bank account.
2:43Your ordinary account gives you at least
2:452.5%. your special account. Don't even
2:48think about investing your special
2:49account. It's a sin to invest from your
2:51special account.
2:51>> Wow. Wow. Wow. Okay. So, there are a lot
2:53of terms here. So, you manage 1.7
2:55billion in investments with Providence.
2:58>> Now, 1.8.
2:59>> Okay. Sorry, [laughter] my bad. 1.8
3:02billion. Thank you. And and soon to be
3:04two billion. So, is that the advice that
3:07you give to everyone? Do not touch your
3:09CPF money.
3:10>> Most of the time, yes. I mean, out of
3:12the 1.8 8 billion that we manage uh only
3:16about 30 million is from CPF the rest of
3:20the 1.8 8 billion is actually from our
3:22client's cash.
3:23>> Right?
3:24>> Why do I say that? Right? So, as I was
3:26saying that your ordinary account and
3:28special account gives you an interest
3:30that is higher than your bank interest.
3:32So, if you're going to invest, you start
3:34using cash first to invest. Don't use
3:37your OA and your SA.
3:39>> So, Chris, I think most Singaporeans
3:41treat CPF like a tax, like the
3:43government taking the money from you,
3:45and you won't see the money until you
3:47turn 55. So that's why people look at
3:50CPF as like maybe why should I put more
3:53money in?
3:54>> I mean it's definitely not a tax. You
3:56are actually not paying the government.
3:59It's not going into the government's
4:00account. You are actually putting it
4:02into your own account. Right? Of course
4:05if you are below 55 years old you got an
4:08ordinary account. You got a special
4:10account and you got a Medisafe account.
4:12Right? and we contribute together with
4:14our employers about 37% of our income
4:18into the account. Each account earns you
4:20interest. The ordinary account earns you
4:232.5% to 3.5% interest. Your special
4:26account can earn you four to 5%
4:29interest.
4:29>> Wow, that's a lot.
4:30>> Yeah. And your medicave can potentially
4:32also earn you four to 5% interest.
4:35>> And that's guaranteed.
4:36>> Yeah. At this moment, it is guaranteed,
4:38right? You're getting minimally that
4:40kind of interest. And then it grows and
4:43grows and grows. And at about 55 years
4:45old, you can take a portion out. The
4:48rest of it will go into a newly form
4:50account when you turn 55, which is
4:52retirement account.
4:54>> That money in the retirement account
4:56will roll for 10 years growing between 4
5:00to 6%.
5:01>> Wow.
5:01>> Per year interest. And then as early as
5:0465 years old, you can have a annot
5:07payout for life. So it is your money. It
5:10is not going into the government's
5:12coffer. It will come back to you one
5:14day.
5:15>> Right? Okay. So that's the ordinary
5:17account which has the most amount of
5:19money.
5:20>> I would say receives from your
5:22contribution yet it most of your
5:24contribution goes into your ordinary
5:26account. There are four main purposes
5:28you can use the monies in the ordinary
5:30account for. Well firstly of course to
5:33pay for the mortgage. Secondly, you can
5:35lend it to your children to pay their
5:38fees if they study in the five local
5:40uni, five local police or a diploma
5:43program from it. Oh, I didn't any of the
5:46two colleges of arts lassal and Nanya
5:48Academy of Fine Arts.
5:50>> Wow.
5:50>> But of course, you're lending one year
5:52after they leave the program whether
5:54they pass or not, your children will
5:56have to pay it back into your account by
5:58installment, right? So, that's
6:00education. Of course, you can buy
6:02savings and investments insurance using
6:05your OA and of course you can invest
6:08under the CPA investment scheme with
6:10money in the O8. Right? So that's the
6:13ordinary account,
6:14>> right? And do you recommend people
6:16taking money from the ordinary account
6:18to invest?
6:19>> I would say that if you have cash, use
6:22your cash first. I think the biggest
6:24mistake people make is that they think
6:26that money's in the ordinary account or
6:29monies in general uh in or monies in the
6:33CPF accounts in general that's not my
6:36money and because I can't touch it
6:38anyway I anyhow invest right
6:42>> I don't care what I buy because anyway I
6:44cannot touch it so I'll just invest
6:46>> that's the mindset
6:47>> yeah but it's 37% of your income you
6:50know
6:50>> that's your own money right going into
6:53the CPF accounts, right? And because you
6:56are getting a pretty good interest rate,
6:58higher than your bank interest rate,
7:01again, I'm saying that if you want to
7:02invest, see whether you have cash to
7:04invest first, then use your cash. Don't
7:07touch your CPF as a start. And if you
7:09can, don't touch your CPF. If cash is
7:12enough for you to invest to reach your
7:14goal, then actually use your CPF like a
7:17safety net. You don't have to touch it
7:18at all. it still, you know, gives you
7:20that pretty good interest for that
7:23amount of risk or for the low risk that
7:26you only need to take. So, leave your
7:28CPF alone if you have cash.
7:32>> And because you said special account has
7:34a higher interest compared to ordinary
7:36account.
7:37>> Okay. Sorry if I sound like a complete
7:39idiot. Okay. I want to know this. Can I
7:42transfer my money from ordinary account
7:44to special account to enjoy the
7:46interest?
7:46>> Yes, you can. Right. So, your special
7:48account do that.
7:49>> Yes, they should. Okay. But there is a
7:51limit.
7:51>> Okay.
7:51>> Right. The limit is that year's full
7:55retirement sum.
7:57>> Okay. And this year 2026 full retirement
8:00sum is $220,400.
8:04>> Wow. You can remember everything.
8:06>> Yeah. Because I I talk about it all the
8:08time. Right. So, if you go and check
8:10your special account and you don't have
8:13this amount yet,
8:15>> you can top up into your special account
8:17up to this limit.
8:19>> Wow.
8:19>> There are two ways to top up.
8:21>> You can use cash to top up
8:24>> or you can transfer money from your
8:26ordinary account to your special
8:28account.
8:28>> Wow. But if I use my cash, I put it into
8:31my special account. The only time I can
8:34withdraw is when I hit 55.
8:37>> Yeah. That's the first uh time you can
8:39withdraw. Now of course people will be
8:41saying like but there's no liquidity you
8:43know I put in I I have to wait until 55
8:45years old.
8:47But look shin if you buy an endowment
8:49plan using you know uh from an insurance
8:52company you are locked up for 20 30
8:54years as well.
8:55>> Mhm.
8:55>> If you are investing for the long term
8:58and you should be investing for the long
9:00term you are also not supposed to touch
9:02the money for the next 20 to 30 years.
9:04Right.
9:05So, if you don't like market risk, then
9:08you should actually put in money into
9:11your special account regularly, whatever
9:13amount you can afford, $100, $500,
9:17$1,000 a month if you can do it. So,
9:20instead of buying an insurance endowment
9:23plan
9:23>> or even putting it in the an FD,
9:26>> yeah, just regularly put it in special
9:29account, right? Of course, a fixed
9:31deposit you have full liquidity. you can
9:33take out anytime. The special account
9:35you can't,
9:36>> but that's the whole purpose for saving
9:38towards your retirement, isn't it?
9:40>> And for savings.
9:40>> Yeah. And you don't want to take it out
9:42anytime you want. If you if you can take
9:44out anytime you want, you will end up
9:46not saving anything.
9:47>> Then do people once they cap out, let's
9:49say you cap out at 200 plus,000
9:52>> for the special account, do you then put
9:55money into your OA ordinary account?
9:57>> You cannot just top up money into your
9:59OA just like [snorts] that.
10:01>> Oh, okay. What you can do is to do
10:03voluntary contribution if your total
10:06contribution for the year hasn't hit
10:0937,740.
10:12Now if you are an employee, you are
10:14employed by an employer, it is quite
10:16likely a lot of people would have
10:18contributed together with their employer
10:21themselves but their employer they would
10:23have contributed 37740 and they can't do
10:26it anymore. But there are many people
10:28out there who are freelancers. Yes.
10:30Self-employed.
10:32>> They can definitely contribute on their
10:34own voluntarily up to 37,740.
10:39And this amount will be split into the
10:42three accounts. O A S A M A
10:46>> equally.
10:47>> Not equally. There is a allocation rate
10:49depending on your age.
10:50>> Okay. So what actually happens when you
10:52turn 55? Can you walk me like through
10:56the whole process step by step?
10:57>> Okay. So, let's say you have to top up
10:59your special account as early as you
11:01can. And after that, you know, every
11:04month you are regularly contributing
11:06into your CPF account, right? Because if
11:08you are working, there's working
11:10contributions still going into your
11:12three accounts. At 55 years old, CPF
11:16board will look at your ordinary and
11:19special account and then they will take
11:22what then is the full retirement sum to
11:24put into your retirement account first.
11:26>> Okay?
11:26>> So, let's just say your OA plus your SA
11:30is $500,000,
11:33>> right?
11:33>> And let's just say the full retirement
11:35sum at that point is $200,000 just to
11:38make it easy.
11:39>> Mhm. So CPA board on your birthday, 55th
11:42birthday, will take 200,000 and put into
11:46your retirement account.
11:47>> Okay.
11:48>> The 300,000 will be left behind in your
11:50ordinary account.
11:52>> Yep.
11:52>> You can leave it there to earn 2.5% or
11:55you can take out anytime you want.
11:57>> So the moment you turn 55, the special
11:59account disappears.
12:00>> That's right.
12:01>> Wow.
12:02>> It's replaced by the retirement account
12:04and what is left is just the ordinary
12:06account. So whatever in excess of the
12:09full retirement sum which is now sitting
12:11in the RA already is now sitting in your
12:14ordinary account. You have full
12:16liquidity. You can take out anytime you
12:19want
12:19>> or you can leave it there just to earn
12:212.5%.
12:22>> Okay. And like I can imagine that people
12:27who speak to financial advisors,
12:29>> they say, "Hey, you have this amount of
12:33cash. Don't put it into your CPF. Invest
12:35in this financial product that have that
12:37has a much higher interest, higher
12:40return." What What do you say to that?
12:42>> I mean, it's not wrong to say that if
12:44you have cash, instead of putting money
12:46into your CPF, you invest it in an
12:49instrument that will give you a higher
12:51return. I think it's not wrong.
12:54However, that particular instrument that
12:57you invest in, well, it must be a good
13:00instrument that will really give you the
13:02return, right? And in the previous
13:04episode, we talked about investing in
13:06things that are not going to give you
13:07that return, right? Yes. Yeah. So, it's
13:09not wrong to say that, but it is also
13:12not wrong to top up your special account
13:15up to the full retirement sum first. So
13:18you build that safety net and then after
13:21that then you use your cash to go and
13:23invest in some of these instruments.
13:25>> Right. Right. I guess sometimes people
13:28might think I might not even live to 55.
13:31>> Mhm.
13:32>> And maybe their mindset is that well I
13:36should make a calculated risk and make
13:39higher returns. I think the allure of
13:41higher returns is very difficult to
13:43resist.
13:44>> But what if you live until 55?
13:46>> Mhm. I mean yes we are all not certain
13:50how long we will live
13:52and again I'll say this right that in a
13:55person's portfolio there must be things
13:58that are safe and there must be things
14:00that are a bit riskier.
14:01>> Mhm. You cannot put everything into safe
14:04stuff, right? And you cannot put
14:06everything into very risky stuff, right?
14:10So this is what we call asset
14:11allocation, right? You diversify. And
14:14your CPF is definitely an instrument if
14:18I may say that is pretty safe.
14:21>> And the interesting thing about the CPF
14:23is that the risk and return actually
14:27they don't tally. Why do I say that?
14:29Because CPF they are invested into the
14:33special Singapore government securities.
14:36Your CPF monies is invested into special
14:40Singapore government securities.
14:43This SSGS in short is not traded in the
14:45bond market. Right. It is like a
14:48guarantee by the government to pay us
14:51the four 5%.
14:52>> Wow.
14:53>> Right. But yet for something so safe the
14:56interest is actually pretty high.
14:58>> Yes. Right? So, well, you must have some
15:01money there because the riskreward just
15:05makes sense, right? And then after that,
15:07if you want to take more risk to get a
15:09higher return than what your CPF can
15:11give you, go ahead and do it.
15:14>> Okay? So, what if I'm 25 years old?
15:17Okay, I'm 30 years away from 55. Like,
15:20retirement is the furthest thing away
15:21from my mind. I just started working. My
15:23CPF is maybe $10,000, $15,000. What's
15:26the smartest thing I can do with regard
15:29to my CPF that my 55 year old self will
15:32thank me for?
15:33>> It's just like me. If I have a chance to
15:37do this all over again 30 years ago,
15:39Shulin, right? Because I just uh crossed
15:4255, right? I'm next birthday 56. If I
15:46knew about this when I was 25 years old,
15:48when I was 25 years old, I was serving
15:51the army because I was a regular army
15:53officer. If I knew that that $27,000
15:58that I put into the country club and I
16:00lost every single cent, I would have
16:02actually top up my special account and I
16:04wouldn't have lost it and I would have
16:07gotten four 5% compounded,
16:10right? Imagine how much that amount will
16:12be today for me now. Right? So if you
16:15are 25 years old, I would suggest to you
16:18that try and top up your special account
16:21as early as possible. Especially if you
16:25don't like to take risk, you don't know
16:26how to invest, just top it up your
16:27special account first, okay? And then
16:30once you hit that, then you go and start
16:32investing. Now if you are already
16:34investing at a very young age like my
16:35son my son started investing when he was
16:3718 and you don't want to put everything
16:40into the special account then maybe put
16:42some into special account and then the
16:44rest of the money you can go and invest
16:46but I would strongly encourage you put
16:49some money into your special account
16:51because it's just it's a no-brainer.
16:55>> It's a no-brainer really. This is an
16:57instrument that gives you four to 5% at
17:02almost no risk. Right?
17:05I used to joke with CPF on this. I said,
17:08"If you are going to pay me commission
17:10for selling CPF,
17:13I'm going to be like a super successful
17:16CPF salesperson because it's a
17:19no-brainer. It's so easy to sell this
17:21product."
17:21>> It's so safe. It's guaranteed. Where can
17:24you find something that will give you a
17:26guaranteed return?
17:27>> And the return is actually not bad. It's
17:30actually pretty good, right? And and the
17:32CPF system, a lot of people don't uh
17:34realize it. It takes care of three
17:36phases of your life.
17:38>> The accumulation phase when you are
17:40still working, you contribute 37% and
17:43you get 2.5 to up to 5% when in your
17:47accumulating phase, right? And then when
17:49you hit 55 years old, if you have been
17:51topping up, you have been accumulating
17:53at 55 years old, you will have quite a
17:56nice amount in your ordinary account, a
17:57few hundred thousand,
17:59>> that allows you to go into
18:01semi-retirement mode if you want.
18:03>> You can take a lower paying job and you
18:06have money in your OA to make up the
18:08difference. You can actually semi-retire
18:10at 55. So that's the second phase.
18:11>> Yeah. And then when you hit 65 years
18:14old, you can go into full retirement
18:16because that's when CPF life is going to
18:18pay. Right? So this is a a instrument
18:22the risk is almost next to zero. I
18:25cannot say zero because there still
18:26political and there still policy risk
18:28but next to zero. Returns are
18:30interesting. Takes care of your
18:32accumulation semi-retirement and
18:35retirement phase.
18:36>> Wow.
18:37>> Don't you think I'm a very good CPA?
18:39>> Yes. It seems like it's been the best
18:40kept secret. I can't I can't believe
18:42that I'm only hearing about it now.
18:43>> I I think a lot of people in the earlier
18:46days, especially before 2016,
18:49right? I mean, there were a lot of
18:51people that they don't understand the
18:54CPF system. They think that the CPF
18:56system is government's way of holding
19:00back money from you, right? They want to
19:02keep this money for whatever reason for
19:04themselves and they don't want to let
19:05you have it. If that's the case, then
19:08there should be no cap to the special
19:10account. They should allow you to top up
19:12as much as possible.
19:13>> Mhm.
19:14>> They should not limit the contribution
19:16to 37,740.
19:18What for? I mean, if they really really
19:20want to hold on to your money, then they
19:22should not limit anyone that wants to
19:24top up, they should do it, right? But
19:26there is a limit. Why is there a limit?
19:30Because to continue to guarantee four to
19:335% from a special account is not easy. M
19:36>> it's actually a burden for the
19:37government to guarantee that right. So
19:41once we understand the CPF system I
19:44think we can better make use of that as
19:46part of your retirement planning. I'm
19:48not saying that oh you know you should
19:50just depend on that alone but it can be
19:52used as part of your retirement
19:54planning.
19:54>> Uh by the way Chris there is this
19:56movement called 1 M65
19:591 million
20:00>> at 65 years old.
20:01>> X 65 years old.
20:02>> Yeah.
20:03>> Is that possible?
20:04>> Yeah. So that's actually started by a
20:05friend of mine know um that movement
20:08right his name is Lu Chen Chuan and what
20:11he's advocating is that as a couple if
20:14you know how to take care of your CPF
20:16accounts O A plus SA plus MA all your
20:19three accounts well by 65 years old you
20:22would be able to hit 1 million as a
20:23couple
20:25>> combined
20:25>> combined that means half a million uh
20:28per person right and as a couple $1
20:31million now that It's become so easy to
20:35achieve for many people
20:37>> really
20:37>> that now 1 M65 is no longer invoked. We
20:41they are talking now about 4 M65. Some
20:44people are talking about CPF
20:45>> in CPF.
20:46>> Wow.
20:47>> Right. Of course 4 M65 is not easy for
20:49everyone but 1 M65 is highly possible.
20:53Now how do you actually get 1 M65? Well
20:56Mr. Lou advocates that you top up your
20:59special account as early as possible.
21:02Right. And I think if I remember
21:04correctly based on uh his numbers,
21:07right, if you top up your CPF and you
21:10hit the full retirement sum before 40
21:12years old, I think it was 30 over years
21:14old, right? And then just let your
21:15working contribution continue to go into
21:17your CPF to hit 1 M65 as a couple is
21:21easy. In fact, many people if they do
21:24that, they would have hit 1 M at age 45,
21:28age 50 years old.
21:29>> No way.
21:30>> If they do that, that's one M. That's
21:31the power of compounding interest.
21:32>> That's the power of compounding and you
21:34are not exposed to volatility risk. You
21:37can sleep at night
21:38>> and you are getting four to 5% from your
21:40special account.
21:42>> Every year January take a look at your
21:43CPF app and you see that five figure
21:45interest coming into your account.
21:47You'll be very motivated.
21:49>> Wow.
21:50>> So Sh, I'm going to ask you, do you have
21:52a CPF app on your phone? Check it.
21:54>> I have I have I have the CPF app on my
21:56phone.
21:56>> Okay. It's very important to have the
21:57CPF app, right? It's a good hack. You
22:00see, we have a lot of apps on our phone
22:02and people who invest, they have their
22:04stock broking app, you know, they have
22:05their robo advisor app, they have their
22:07banking app, right? And when you have a
22:10app on your phone, a banking app or
22:12investment app, you check it once in a
22:14while and well, hopefully what you see
22:16encourages you because you're making
22:18money and your bank has got more and
22:19more money, right? You should have a CPF
22:22app.
22:22>> Okay, let me get my phone and log into
22:24CPF. Okay. Okay. So, I just logged in to
22:27my CPF account. Uh, I can
22:30>> Is this from the app or from the
22:31website?
22:31>> This is from the app.
22:32>> Okay. So, you have an app.
22:33>> I have an app and this is the first time
22:35I'm logging in myself because usually my
22:36husband handles this for me.
22:38>> Okay. You want to take a look?
22:39>> I'll take a look.
22:40>> Yeah.
22:41>> Okay. So, you are like most
22:44Singaporeans.
22:45>> Okay.
22:46>> Okay. Your ordinary account, I can see
22:47that most of the money has been used for
22:49paying mortgage.
22:50>> Yes, I'm paying my mortgage.
22:51>> That's quite normal, right? Your
22:52Medisafe account, you have hit the
22:55limit. You have got the basic health
22:57sum. Okay.
22:57>> Right. So that's the limit. Your special
22:59account,
23:00>> what's the limit for medicine?
23:01>> It's almost like 80,000.
23:02>> Okay.
23:03>> Okay. About about there I would say.
23:05Right. And your special account, you are
23:08almost hitting your full retirement sum.
23:11>> Right.
23:11>> Okay. Now
23:13you have this chance now to top up your
23:19special account up to the full
23:20retirement sum which is 220,400.
23:23Right? go and do it as soon as you can
23:26because once you when you top up
23:28>> the working contribution will continue
23:30to grow will continue to go into your
23:31special account and will go your your
23:33special account will go faster because
23:36at some point in time your working
23:38contribution that you put into your
23:41special account every month will make
23:43you hit your full retirement sum very
23:45soon and you cannot top up anymore. So
23:47you want to top up as soon as possible
23:49into your special account while you
23:51still can top up and your working
23:53contribution can continue to go in and
23:55your special account will grow. Shulin,
23:58you have this last chance to top up your
24:01special account.
24:02>> I'll do this after that.
24:03>> Yeah, because you don't have you don't
24:04have a lot of buffer left or rather
24:06you're going to hit your full retirement
24:07sum very soon. So do top it up.
24:10>> Now I want to talk a little bit about
24:12your ordinary account.
24:13>> It's low, right? It's low because most
24:15Singaporeans we use our ordinary account
24:17money to pay mortgage
24:19>> myself included.
24:21>> But you know I reached a stage of my
24:23life I'm 56. So my ordinary account
24:26money it's very liquid
24:30>> and over the last 20 years of my life
24:32because I've used my ordinary account to
24:34pay for my mortgage.
24:37I can now voluntarily
24:40put back this money that I have taken
24:42out to pay mortgage into my ordinary
24:44account. Now why is this useful?
24:48So for my company, the bonus season has
24:51just ended, right? We just we paid our
24:53people bonus. So I've got cash in the
24:55bank. My cash in the bank is earning
24:58next to nothing.
25:00But I've used up say for example half a
25:02million dollars plus whatever interest I
25:06didn't gain because I took out the
25:07500,000 from my OA to pay for my house.
25:10Right? So I didn't earn a 2.5%. So let's
25:13say 500 plus my interest is 700,000. I
25:16can put back in my ordinary account up
25:18to 700,000. So I've got this cash from
25:21my bonus that's sitting in my account
25:23not earning very much. I can now
25:25transfer it into my OA. It's called a
25:28voluntary housing refund
25:30>> and I earn 2.5% on it and I can take out
25:34any time that I want full liquidity.
25:36>> That's because you have hit 55.
25:38>> And if you are listening to this and you
25:40are near 55 or above 55, you don't have
25:44to be 55, right? You can be 53. You got
25:45two more years only. You can start
25:47thinking about putting money into your
25:48OA instead of leaving it in your bank
25:50account. Some people are putting money
25:52into still Singapore savings bonds and
25:54all that which is fine but your ordinary
25:57account is giving you 2.5% which is
25:59higher and you have got full liquidity
26:02you can put it in
26:03>> wow
26:03>> and it is probably safer than leaving
26:06your money in your bank account
26:08>> because it's going to be a lot harder
26:10for scammer to access your CPF account
26:13is easier for them to access your bank
26:15account.
26:16>> Wow.
26:16>> So do that.
26:18>> Wow. That's so much about CPF that I
26:22never knew.
26:23>> Now, I just want to balance this off.
26:25>> Okay.
26:26>> Right. And less people think that I This
26:28is a CPF sponsored podcast.
26:29>> No, it's not. We're not paid by CPF to
26:32say this.
26:32>> And less people think that I'm a CPF
26:35employee. I am not. Right. I'm just
26:37saying that we have a system that is so
26:40good, make use of it,
26:42>> but still diversify.
26:44>> Yes.
26:44>> Okay. In fact, we should talk about
26:46diversifying now. Let's talk about
26:48investing outside of CPF, right? And
26:51before we get into ETFs, exchange traded
26:54funds and portfolios, where should
26:56someone actually start? Because if
26:58someone's listening in and they are
27:00living paycheck to paycheck, they don't
27:02have much savings. What is step one for
27:07them?
27:07>> If you're living from paycheck to
27:09paycheck, your biggest return does not
27:12come from investing. Your biggest return
27:15comes from making sure you have a
27:17surplus,
27:18>> right? So right now if you are you are
27:20living from paycheck to paycheck, I
27:22wouldn't suggest that you look for
27:23investment options. I wouldn't suggest
27:25that you top up your CPF, right? Because
27:28you are not going to have liquidity for
27:30the next 10 years, 20 years, right? I
27:32think the first step is to make sure
27:35that you have a surplus
27:36>> which is an emergency fund. Um, no. It's
27:39budgeting is to make sure that your
27:41income is more than your expenses,
27:44right? So, you either go and look for a
27:46job that pays you more or you look at
27:49your expenses and leave below your means
27:51and cut it down if you can. First create
27:54the surplus. I think that's the first
27:55step.
27:56>> Okay.
27:56>> And after you have created that surplus,
27:58set aside the surplus up to the
28:01emergency fund. We always say emergency
28:05fund is 3 to 6 months of your monthly
28:07expenses. However, if you are in a job
28:10that is harder to replace or maybe you
28:12are self-employed
28:14whereby your income is less certain,
28:17maybe setting aside 12 months of your
28:20monthly expenses as emergency fund would
28:22be wiser. So that's the second step. Now
28:24after you have done these two steps,
28:27then you think about investing.
28:30>> Everything feels so uncertain right now.
28:32you know, there are wars, there are
28:34tariffs, and there's AI coming for our
28:36jobs. Is it still safe to invest?
28:41>> I think over the last 100 years, the
28:44world has always been uncertain.
28:47I think since the world began, you know,
28:50the world has always been uncertain.
28:52There has never been a time whereby
28:53things are certain. But of course,
28:56because of recency effect, we always
28:58remember things that happened recently.
29:00We feel that volatility uncertainty has
29:04intensified. I'm not wrong, right? And
29:06usually people would be more careful
29:09with investing. But actually this is
29:12really the best time to invest when
29:14things are uncertain. Now I said that
29:17with a little bit of hesitation. Shulin
29:20why? Because although the world in terms
29:22of geopolitics have become more and more
29:25uncertain,
29:27the markets are actually doing very
29:29well. M
29:29>> it is not as if the markets have
29:31crashed. I mean the markets have reached
29:33all-time high. Well, so regardless of
29:36how the markets are, I think it's still
29:39a good time to invest if you are
29:40investing for the long term. The last
29:44thing I'll say about this,
29:4612 months ago,
29:49people were saying that markets or the
29:51world is very uncertain.
29:53>> Mhm.
29:54>> And so I'm not going to invest. Now if
29:57they have done that they would have
29:58missed out the last 12 months of
30:01fantastic markets return. So you see
30:04it's actually very hard to guess when is
30:05the best time to invest. If you are
30:07globally diversified and you are
30:09invested for the long term long-term
30:11meaning to say 15 20 years and many of
30:14us we are we don't need this money now
30:16we only need it 15 20 years later then
30:19there is no bad time to actually invest.
30:22>> Let's talk about insurance. What
30:24insurance does someone actually need?
30:27Because I think a lot of people either
30:29have no insurance or like me, I have 20
30:32over policies.
30:34>> Yeah. I think to decide what insurance
30:36you need, we got to first start with
30:40step one and step one is asking yourself
30:44what risk are you exposed to? Because
30:46the purpose of insurance is to mitigate
30:49a life risk. So therefore the first step
30:51is to ask what kind of risk are you
30:53exposed to? For example, if you are
30:55single, right? You're only 25 years old,
30:58right? You just started out working. Now
31:01if you die today,
31:03no one at home is going to miss you
31:06financially. Hopefully someone miss you
31:08emotionally, but no one is going to miss
31:10you financially, right? And if no one is
31:13going to miss you financially,
31:15income loss is not a risk.
31:19It's not going to affect your family at
31:21all. And if you are not exposed to this
31:24risk, then there's actually no need to
31:26buy death coverage cuz you don't have
31:28the risk, right?
31:30>> But today, Shulin, you have two young
31:32kids, right? You are earning an income
31:35and today if you die, your family is
31:38going to be impacted financially. Then
31:41you have this risk and therefore then
31:43you look for the insurance to cover this
31:45risk. Now if you have this risk the next
31:48question to ask is how long do you need
31:51to cover this risk for? Well I'll say
31:53that if you are covering a risk to you
31:55you're covering the loss the potential
31:57loss of income then it's a temporary
31:59risk because there will come a point in
32:01your life whereby you are no longer
32:03earning an income. Your children will be
32:06financially independent of you. Right?
32:09So your risk is actually temporary.
32:11Maybe you only need to cover this risk
32:14up to 70 years old or 65 years old or 60
32:16years old depending on when you plan to
32:18retire. Right now once you know how long
32:21the risk you need to cover for the next
32:23step then is to calculate how much do
32:26you need to cover the risk for. Maybe
32:28it's 20 years of your income plus
32:30whatever liability that you want to pay
32:32off plus your children's education that
32:34you want to pay. You add up all together
32:36maybe that is $2 million that you need
32:37to cover. Then you decide on what type
32:40of insurance to buy. And in this case,
32:44using you as an example, you need term
32:46insurance, right? Why term insurance?
32:49Because it is the cheapest way to get
32:51yourself fully covered for $12 million.
32:53>> Okay. And you can buy term insurance
32:55from any insurance provider.
32:57>> Yeah, you can buy from any insurance
32:59advisor. You can buy from the insurance
33:00company. You can buy from a financial
33:02advisor,
33:03>> right? So, it's available. Um, and like
33:06I said, I do not know whether I'm
33:09advertising term insurance. The cheapest
33:12term insurance you can find in Singapore
33:16if you have served national service is
33:18the MHA Mindaf group term insurance for
33:23a million dollar cover. It's like $40
33:25$50 that you pay every month,
33:27>> right? If you don't know what to start,
33:29start with that one.
33:30>> Okay. So there are more investment
33:32options than just ETFs of course and
33:34okay now that we talked about insurance
33:36let's talk about FD fixed deposits and
33:39my mom used to swear by it and I would
33:41get go to May bank I'll have six months
33:44and then I'll go to OCBC bank another
33:46six months I I've stopped doing that
33:48>> um what is your take on fixed deposits
33:51>> I mean it has served our parents well
33:53but it may not serve us as well now
33:56right I can understand why our parents
33:57put into fixed deposits I can even
33:59understand why our why our parents buy
34:01insurance endowments because the capital
34:04markets back in those days uh were not
34:06as developed as now right and fixed
34:08deposits at that point in time because
34:10interest rate were pretty high just make
34:12sense for them and it gives them
34:13liquidity but I think if we depend on
34:15just fixed deposit today it may not help
34:18us reach our goal if there's still a
34:20place for fixed deposit I think so right
34:23your emergency fund you can actually put
34:25in fixed deposits just be mindful that
34:27if you terminate your fixed deposits
34:29earlier year or early then you might
34:32lose all the interest you only get back
34:34your capital right so that's fixed
34:36deposit but beyond fixed deposit if you
34:39are saving your emergency fund you can
34:41also consider Singapore savings bond I
34:43think now the yield for the Singapore
34:44savings bond is just slightly below 2%
34:47thereabout right or T bills which were
34:50very popular during the covid days
34:52because it went up the six month T bill
34:54can go up 2 3 4% right today of course
34:57has come down but it's still better than
34:58your uh fixed deposits generally. Yeah.
35:01So, fixed deposits, T bills, SSBs, and
35:04if you're above 55 like me, even
35:06ordinary account, these are all good
35:08places to park your emergency fund.
35:10>> How about gold? Because apparently it
35:12hits some all-time high.
35:15>> Is it worth investing in gold?
35:17>> Yeah. So, gold is a type of precious
35:19metal, right? And it came to uh focus
35:22the last 12 to 18 months because gold
35:25prices have gone up a lot. Now the first
35:28thing we need to understand is that when
35:31you buy go if you buy a go bar and you
35:36put it in your drawer one year later it
35:40is not going to grow into a second goba.
35:42>> No. [laughter]
35:44>> Okay.
35:45>> There is no return in a way right from
35:49gold. It doesn't multiply.
35:50>> Right.
35:51>> Right. All your rings and necklaces
35:53opens the same. It doesn't it doesn't
35:54grow. Right. The primary uses of gold,
35:57the primary use of gold is actually
35:59jewelry.
36:00>> That's a primary use. The second use for
36:03gold is circuitry in IC chips. Right?
36:07Now the question we got to ask ourself
36:08is
36:11has the demand gone up significantly
36:13over the years? Not really. The other
36:16thing that we need to know is that the
36:18supply of gold is finite every year. I
36:22cannot remember the numbers uh right
36:24now. So I shan try but every year there
36:27is a finite amount of gold being mined
36:29because it's not so easy to find new
36:31gold mine and then it and it takes time
36:33to actually you know go out. So what is
36:38then causing gold price to go up
36:40>> because of the war?
36:41>> It's actually short-term demand sudden
36:43demand for gold and it's definitely not
36:45coming from jewelry. It is mainly
36:49government buying this gold.
36:51>> Oh
36:52>> right. And there are various reason why
36:54governments are buying uh this gold. The
36:56Singapore government has also bought
36:58quite a bit of gold the last uh few
36:59years. It could be part of their their
37:01their policy you know and all that. We
37:03we don't really know why every you know
37:06why each of the government buy. Because
37:08of this and because of geopolitical
37:11uncertainty, usually when there is
37:13geopolitical uncertainty, people
37:16government like to hold go
37:18>> right and this sudden demand has caused
37:20gold price to go up. But if you look at
37:24gold return over the last 30 years, the
37:28average return of gold is about 5%
37:30annualized per year. If you look at
37:32global equities return over the last 30
37:35years has been about 10%. Wow.
37:38>> So if you invested in go over the last
37:4030 years, you would not have done as
37:44well. If you put a lot of go in your
37:46portfolio the last 10, 20, 30 years, it
37:48would have muted the returns of your
37:51portfolio.
37:52>> Okay?
37:52>> Right? Some people say you buy gold to
37:54hedge against inflation. Yes, that is
37:57true. But equities is also a good hedge
37:59for uh to hedge against inflation.
38:03>> Now, in short, what am I saying? Okay,
38:06I'm saying that well there is a reason
38:08why people buy go. Go hasn't done very
38:11well over the last 30 years. He has done
38:13very well over the last uh 18 months or
38:16so because of geopolitical race.
38:19If you are investing to grow your money
38:22and to be inflation, equities is
38:24probably a better bet than go.
38:27>> Okay. How about property? Because in
38:29Singapore I know couples decouple to buy
38:32separate properties and their mindset is
38:35they live in one they rent out the other
38:37one.
38:37>> Yeah. I mean equity rather property has
38:39been a instrument that you know a lot of
38:41people think that is their road to
38:43wealth. The problem with property is I
38:46think this not many Singaporeans can
38:49afford after buying one property two
38:51property to have spare to invest in
38:54other things. It is really a rich man's
38:56scheme right. So if you have used all
38:59your monies to go and invest in one or
39:01two properties and if these two
39:02properties fail you that's it you are
39:05taking concentrated bets on one asset
39:08class which is property right and you
39:10know property depends on what type of
39:12properties it depends on location it
39:14depends on so many things the only thing
39:16that makes you feel safe about property
39:17is you can touch you can feel you can
39:19see and there's a name and you can tell
39:20people that look I I I have two
39:22investment uh property it makes you look
39:25better than if you say I own two types
39:27of ETFs, right? Yeah. But it's actually
39:30quite risky. And the returns that come
39:31from properties, a lot of it comes from
39:33leverage. It comes from the loan. Yes.
39:36>> Right. So, I'm not saying no, but just
39:38be very mindful that when you invest in
39:40property, for most Singaporeans, you are
39:43taking a concentrated bet. And if those
39:46properties that you invest in, one or
39:48two,
39:48>> they don't turn out well,
39:50>> your plan is going to fall apart.
39:52>> So, do you have any investment property?
39:54>> No, I don't have. So just the flat that
39:56you stay in.
39:57>> Yes.
39:57>> Okay.
39:58>> And all my other practice what you
39:59preach.
39:59>> Yes. All my investments are into
40:01equities.
40:02>> Okay. Very good. Okay. We're going to
40:04talk about equities now. So the US stock
40:06market feels very volatile. You know,
40:08tariffs, trade wars, dollar
40:10depreciation.
40:11Um and the ETFs that I think I'm
40:14personally invested in together with my
40:16husband. Uh there's a portfolio,
40:19>> right? I mean clearly I trust my adviser
40:22very much. So, I'm not very certain, but
40:24I want to know about all these things
40:25because they say that the US dollar is
40:27going down in value and a lot of the
40:29ETFs is in the S&P 500,
40:33but it's still safe, right? We can still
40:35do that.
40:36>> Okay, so
40:39this is a tough question to answer very
40:41quickly in the podcast, but I'll try.
40:42>> Okay, there is a difference between
40:44country risk and the companies that you
40:47invest in, right? So if you are
40:49investing in the S&P 500, it means the
40:52biggest 500 companies that are listed in
40:54the stock exchange. These companies are
40:57globally their business are global
40:59businesses.
41:00>> Yes.
41:00>> Right. So even if US as a economy is not
41:03doing very well, it doesn't mean that
41:05these companies are doing badly because
41:08like for example Apple, they don't just
41:10sell to Americans, they sell to
41:12different parts of the world.
41:13>> Mhm.
41:14>> Right. Tesla, they don't just sell to
41:15Americans, but they sell to different
41:17parts of the world. Netflix. We are
41:18watching Netflix all over the world
41:20right so there is a difference between
41:22the country as well as the companies
41:24that you invest in okay now when things
41:27are uncertain that is why it is best to
41:29be globally diversified so you don't
41:31just put your money into US you also put
41:33your money into other areas emerging
41:35markets Europe Japan China Singapore
41:38right you so you are globally
41:40diversified right so that's one secondly
41:43US dollar I mean there's been a lot of
41:45saying about the dollarization. Okay,
41:48which means to say that the US dollar
41:51losing its status as the reserve
41:54currency. Now is that going to happen? I
41:56do not know.
41:58But if you look at history before US was
42:02the reserve currency,
42:04pound the British pound was the reserve
42:06currency and the British pound started
42:09to lose its status
42:12after World War II. It took about 20
42:15years before finally US replace the
42:19British pound as the reserve currency of
42:20choice. So even if the dollarization is
42:25going to happen, it's not going to
42:26happen overnight. It's going to take a
42:29long time before it happens. In the
42:30meantime,
42:32the central banks are still holding a
42:34lot of US dollar as their reserves. the
42:36countries are not going to allow the US
42:39dollar to suddenly crash because if that
42:42happens a lot of countries is going to
42:44get into trouble because the reserves
42:46all the amount the reserves will devalue
42:48>> because they hold a lot of US dollars.
42:50So that process will take time.
42:53So what's my point? My point here is
42:57that you can still continue to invest
43:01in the S&P 500 if you want to, but be
43:04globally diversified, right? And you
43:07should still be fine.
43:08>> What I want to know more is about ETFs,
43:11which is what I'm heavily invested in,
43:13exchange traded funds. And I first heard
43:15about it in this book called The
43:17Millionaire Teacher
43:18>> by Andrew Halum. I believe the the the
43:22mindset is to do dollar cost averaging
43:24not just to invest a lump sum.
43:26>> Is that something that you recommend
43:29too?
43:29>> Right. So what is firstly ETF? Exchange
43:32traded fund.
43:33>> It is the fund that is traded on the
43:36exchange.
43:37>> That's why it's called exchange traded
43:38fund.
43:39>> Yes.
43:39>> Now so when you buy into this
43:42instrument, this ETF invests into a
43:46basket of securities. So if you buy an
43:49ETF that tracks the S&P 500 index, when
43:52you buy this one ETF, you are invested
43:55in the 500 biggest stocks, biggest
43:59company on the US exchange via this ETF,
44:02right? You can also invest in an ETF
44:05that tracks the MSCI or country world
44:08index. So you are invested 2,000 over
44:10securities not just in US but in other
44:14parts of the world, right? So that's an
44:17ETF.
44:18>> I want to ask you about stock picking.
44:20>> Yeah.
44:20>> Okay. So yes, I'm invested in ETF, but I
44:23cannot help but feel envious when I hear
44:25people saying, "Oh, you know, I trade
44:26and I made 40% return. I have a basket
44:29of 20 companies I'm tracking and you
44:31know, I'm a big fan of Lululemon, uh,
44:33which is the sports gear. I don't know
44:34whether you heard before. I I told my
44:36husband, hey, we should buy Lululemon
44:38shares because I like Lululemon." And he
44:40said, "No such thing." Anyway, it's a
44:41good thing we didn't buy because it went
44:42down. And sometimes I also hear of
44:45friends, hey, you should invest in
44:47Bitcoin in crypto. How come you didn't?
44:49>> Then I'll ask uh my fin my financial
44:51advisor, he's like, "Oh no, no, no.
44:53Providence take is um okay, why don't
44:55you share what's provident take on
44:56crypto?
44:56>> We don't pick stocks, right? Firstly, we
44:58don't pick stocks, right? Because when
44:59you pick stocks, there is a chance you
45:01pick it wrong." And it's very very hard
45:03to pick the correct stocks that win all
45:05the time. And if you are not greedy,
45:07then it is better to actually be
45:09globally diversified. So that's our take
45:12right now. when it comes to
45:13cryptocurrency. Now the first step in
45:15provision
45:16>> actually Chris you said before to me
45:18>> something about Warren Buffett
45:20>> that makes sense.
45:22>> So there was a period that Burkshshire
45:26did not beat the S&P 500. Now in the
45:29earlier days, Warren Buffett actually
45:30did very well and beat the S&P 500. But
45:34sometime between end of 204,
45:39December 204, January 2005 and forward
45:4320 years, that means up to December 2024
45:46thereabout. That was the period that
45:48Burkshshire didn't beat the S&P 500. And
45:52the last one year or so, they have also
45:55not done very well. Now what am I
45:57saying? Now, I'm not saying that Warren
45:59Buffett is not good, right? Because
46:01overall, I think Warren Buffett still
46:03has done better than the S&P 500, but
46:06there was a almost 20-year period
46:08whereby Burkshshire didn't beat the S&P
46:11500.
46:12Now if even the oracle of Omaha
46:17cannot beat the market, what makes us
46:21think that we are so good to pick the
46:24stocks and can consistently beat the
46:27market year after year? So I would say
46:31there is no need to try
46:34as long as you are not greedy. As long
46:38as 7 8 9% per year is good enough for
46:42you to enable the life goals that you
46:45want to achieve actually just be
46:47globally diversified
46:49and you can sleep well.
46:50>> Okay,
46:51>> back to the point back to the question
46:53on cryptocurrency. Now in the investment
46:55process uh in Providence investment
46:58process the first thing we do is we look
47:00at empirical data and decide which asset
47:02class can based on history can give you
47:07the reliable or can give you the
47:09expected return reliably uh reliably.
47:13We found only two which is equities and
47:17bonds. Cryptocurrency has been around
47:19for less than 20 years. I think now
47:21maybe 15 16 years. it has not been
47:24shown. It doesn't have enough empirical
47:26formula to give you that expected return
47:30and the volatility is huge. Now even if
47:34you know that this asset class can give
47:37you the return, it doesn't mean you will
47:40stay invested to get the return because
47:43when the markets become very volatile,
47:45you may jump out. Now of course people
47:47will say yes but if I know for sure it's
47:50going to give me the return I will stay
47:51on
47:52well based on my experience that has
47:54never been the case right when the
47:56markets become volatile your head and
47:58your head and your heart cannot connect
48:00your head tells you that I should stay
48:02invested but your heart can't do it you
48:04jump out even if the returns come later
48:06on you are not going to be able to
48:08capture the return when it comes
48:09>> okay
48:10>> so that's a problem with crypto
48:11>> yeah it's a head and heart problem
48:12>> it's a head and heart problem and most
48:14of the time investing is more a heart
48:17thing than a head thing.
48:18>> Ah, so when I was in my 20s, when I
48:21first got my paycheck, I bought like
48:22penny stocks on the Singapore stock
48:24exchange and I also bought City Bank
48:26stocks
48:27>> and I made money on my city bank stocks
48:29because it went down during the Leman
48:31Brothers. But overall, after all the
48:33heartache and panic attacks,
48:36>> I made no money. It's break even. So,
48:38it's a good result.
48:39>> But that's why I then chanced upon, wow,
48:41exchange traded funds. Okay, let's make
48:43this really practical for the listener.
48:45If you were to build a simple investment
48:48portfolio for your average Singaporean,
48:51you know, earning median income, they
48:53don't have financial background, they're
48:55just starting out. What would it look
48:56like?
48:57>> Just buy one ETF that tracks the entire
48:59global stock market. That's all. Just
49:01one.
49:02>> Just one. That's it. And top up your CPF
49:05account.
49:06>> Do that first, of course. Okay. So, do
49:08that first. And after you got access,
49:09just buy one ETF that tracks the entire
49:12world stock market. So every month put
49:14some money into that ETF.
49:16>> Now if you're buying ETF that can may
49:18not be very efficient because when you
49:19buy ETF there is a brokerage cost. So if
49:22you're only putting like $100 then the
49:24cost can be very high because I know
49:26some brokerages they charge minimally
49:27$10. So if you're investing $100 a month
49:30and your cost is $10 that's 10%. So if
49:33you don't have big amount accumulate to
49:35a sizable amount before you go and uh
49:37buy it.
49:38>> Okay. And then is it too late if I'm
49:40already in my 40s to do this?
49:43>> Well, if you are 40s, you have another
49:4645 years to go before you reach your
49:49life expectancy. When you retire, you
49:51are not going to need all your money.
49:54You will have to break your money into
49:55buckets. Some money that you need
49:57immediately, don't invest. Monies that
50:00you don't need until maybe 20 years
50:03later when you are in your 60s, you're
50:0440 now and you need the money only at 60
50:06years old. You still have got a 20 years
50:08time horizon to invest into equities.
50:11>> And what if someone listening in is
50:13like, "Oh, wow. I love this advice. I
50:15want to take action, but my spouse and
50:17I, we don't agree on money."
50:21>> I think the first thing is to sit down
50:24with your spouse to talk about the life
50:27that you want to live
50:29because sometimes the disagreement is
50:31not about the money because you're
50:33trying to make money decision first. I
50:36think the first decision is to sit down
50:38together and talk about the life you
50:40want to live and based on the life you
50:42want to live then you work backwards and
50:44decide what are the instruments that you
50:46need to invest in right and one of you
50:49may then decide that I need to take a
50:51bit more risk in order to reach that
50:54goal one of you may realize that
50:57actually you don't need to take so much
50:59risk to be able to live the life that
51:01you want to live
51:04and both of You may have to make certain
51:06tradeoffs
51:08>> to still be able to live the life that
51:11you want to live
51:12>> while taking on an investment risk that
51:14both are comfortable with.
51:15>> Yeah. So don't start with debating on
51:18the instrument, the risk and the return.
51:20That's not the starting point. The
51:21starting point is to come as a couple
51:23and talk about now this is the life you
51:26want to live. How much money would I
51:28need? How much money would we need to be
51:29able to live that kind of life? Then you
51:31work down the types of instruments that
51:34you should invest in.
51:36>> But do you agree with me? You see a lot
51:38of couples like my husband and I, we're
51:40just opposites. Opposites attract.
51:42>> So I like to go to a nice expensive
51:45restaurants for our date nights. He's
51:47very happy with the food court. And you
51:49know, we compromise. We take turns.
51:51>> And
51:53>> I guess there's no oneizefits-all
51:54solution. It's about communicating and
51:56maybe meeting somewhere in the middle.
51:58>> Yeah. Give and take. And I mean balanced
52:01portfolio.
52:02>> So some days you go to your very
52:05expensive Atas restaurant,
52:07>> some days you go to a very cheap copyam.
52:09So you come together and you compromise.
52:11And that's a balanced portfolio.
52:12>> Okay. Wow. Okay. Interesting. Okay. A
52:15few more questions before we wrap up.
52:17What's the one investing mistake you see
52:19people make over and over again?
52:22>> One. Just one. [laughter]
52:26The first one that comes to mind
52:29>> I think it's something that we have
52:30spoken about in our last episode right
52:33it is about believing that you can make
52:36a quick buck from investing
52:40and everybody is looking for that one
52:43single silver bullet
52:46but there is really no silver bullet
52:49and sometimes when I come to this kind
52:51of podcast right Shin I'm a bit worried
52:55because you asked me just now about
52:56designing a portfolio and I say just buy
52:58one ETF that tracks the entire stock
53:01market, right? And I'm so afraid
53:03listeners will go out there and then
53:04they dump everything into
53:05>> Don't worry, we put in our caveat in our
53:06show notes that this is not financial
53:08advice and this is simply a conversation
53:11and it may enlighten you, it may not and
53:13you may disagree but this is your lived
53:16experience.
53:18>> Yes, even with that it doesn't take away
53:20my responsibility.
53:22>> Okay.
53:22>> Right. Just like what I have spoken
53:24about in our last episode about
53:26influencers because influencers say that
53:28all the time, right? This is not
53:29financial advice. I'm just sharing and
53:31if you want to take it, you take it.
53:32>> True.
53:33>> Right. But because we have influence and
53:35we got to be careful, right?
53:36>> And so I I I am a bit hesitant sometimes
53:39when people ask me,
53:41>> right?
53:42>> And so I will say this, right? Whilst I
53:45said that yes, if you force me to design
53:48one portfolio that every sing Yeah. just
53:52buy one ETF that tracks the entire stock
53:54market.
53:55>> But if you're listening to this,
53:57>> this is not that one silver bullet. You
53:59cannot just have an investment portfolio
54:02>> and nothing else, right? Because we did
54:04also talk about other things. We also
54:06talk about topping up your CPF.
54:08>> We also talk about putting money in your
54:10special account. We also talk about
54:12having emergency fund, right? You need
54:14to have a few other stuff to scaffold
54:18before you build a portfolio and invest
54:21everything into equities.
54:23>> Yes.
54:23>> You know my wife and me
54:25>> Mhm.
54:25>> we are combined balanced portfolio
54:28because my wife is a lot more
54:29conservative than me. Now I have no
54:32bonds in my portfolio. Zero 100%
54:35equities. But that's because my wife has
54:39all the bonds and all the cash.
54:41>> Oh wow. She doesn't invest in a single
54:43equity, right? Because her risk profile
54:47is not as risky as me. Yeah. So, as a
54:51couple, you see, we're a balanced
54:53portfolio. If I put our portfolio
54:55together, we are like a 50/50, right?
54:58>> Right.
54:58>> Yeah. So, if I don't tell you this and
55:00you look at me and you say, "Wow, you
55:02are 100% equity, so I should follow you
55:04100% equity."
55:05>> But you do not know that as a family, we
55:07are a balanced portfolio because my wife
55:09has all the cash and have all the bonds.
55:11Oh, I love that. Okay, so before we wrap
55:14up, we have a few questions from
55:15listeners. Thank you for sending them in
55:18and I mean it's very difficult to answer
55:21a couple of them actually.
55:22>> Yeah.
55:22>> Um but I think you you will do your
55:24best.
55:24>> I try.
55:25>> So what if investment
55:28the investment that I've put in has has
55:30just all of them has just crashed just
55:33as one is supposed to cash out. So let's
55:36say I'm 65, right? and for the last 30
55:39years I've invested in ETFs and then at
55:42that moment a Leman Brothers crisis
55:45happened.
55:46>> Yes, it's a very difficult question.
55:48>> This is a worst case scenario.
55:49>> Yeah. So I I have to make some
55:50assumption. Okay. So if you are
55:53investing into the correct things when I
55:57say correct things for example you are
55:58invested into a globally diversified
56:01portfolio and you know that in time to
56:04come you will recover as it has always
56:07been right then I'll say please don't
56:10sell out from your investments you are
56:12retired try and use your other sources
56:15of money to fund your lifestyle be it
56:17from your CPA be it from your cash don't
56:20sell off your investments because you
56:21once you sell, you realize the loss.
56:24That's the end, right? So that's the
56:25first thing. But if you are investing in
56:27crappy stuff, some people they invest in
56:30crappy stuff, but they are just
56:32unwilling to sell because when they
56:34sell, they realize the loss. My analogy
56:37is this. If you have water in a pill
56:40that is leaking,
56:43waiting
56:44for a long time does not mean that the
56:47pill is going to be filled up again
56:49because it will always be leaking. It is
56:51better to pour the water in a leaking
56:53pill into another pill that will not
56:56leak so that it will continue to build
56:59up. Right? So you decide whether your
57:02pill is a leaking pill or not. Right? If
57:04it's not a leaking pill, a good one,
57:06don't cash out. Stay invested. Use other
57:09sources of fund to fund your lifestyle.
57:11If it's a leaking pill, have the courage
57:13to pour into another pill because it's
57:15not going to fill up if you wait a long
57:16time.
57:17>> Yeah. It's like the sun cause fallacy.
57:20>> Yes. because you sunk so so much of your
57:22cost, your energy, your time, you think
57:24I might as well just stay there and hope
57:26for the best when actually it's better
57:28to find a new pale.
57:29>> Sometimes people are in denial. They
57:31don't want to see, right? They look at
57:32the investments and it's doing so badly
57:34and they say they don't want to see and
57:35they just hope that it's going to go up
57:38again. But if it's a crappy stuff, I'm
57:40sorry. It's crappy.
57:42>> You can't you can't change crap to gold.
57:45>> Yeah. I mean, that's why sometimes when
57:46people keep saying stay invested, stay
57:48invested. is only half the truth because
57:50you must be staying invested in the
57:51correct stuff.
57:52>> Yeah, that's right. I mean that applies
57:55to everything in life.
57:56>> Everything in life.
57:57>> Relationships, a job. Okay. And what
58:01should one's mentality be towards
58:04investment
58:06long-term?
58:07>> Investment for most people, it is not
58:10investment that makes you rich.
58:14It is actually your surplus that makes
58:16you rich.
58:19Investment helps you stay rich.
58:22Why do I mean or what do I mean when I
58:25say stay rich? The purpose of investment
58:27for most regular folks is to beat
58:30inflation.
58:32Right? So don't go into an investment
58:35hoping to make 30 40% to create the
58:38wealth that you think you can get
58:40because the purpose of investment is
58:42just to help you stay rich.
58:43>> Wow. Wow. That makes so much sense. And
58:47what is the right time to invest?
58:51>> Yesterday. [laughter]
58:53>> I love it. I love it. Okay, final
58:55question. Is is cash still king?
58:58>> Always. But having too much cash can be
59:01a problem. I mean cash is always cash is
59:04your capital, right? I mean without
59:05capital
59:07in a business, you cannot grow your
59:09business. Without capital in our
59:12personal balance sheet, you cannot
59:14invest and grow more. Right? So cash is
59:17always king, but it's important to
59:20optimize. Don't have too much cash
59:22because inflation is just going to eat
59:24it up. So how much cash should you have?
59:27Well, like we have said before, 3 to 6
59:30months of your monthly expenses in
59:31emergency fund. If you feel safer having
59:3312 months, I think that's good enough.
59:36but don't have five years of cash, six
59:39years of cash sitting in a bank account,
59:42you are definitely losing money because
59:46inflation in Singapore on average 2% to
59:483%. If your cash is giving you 1% or
59:52less, you're losing 1%
59:54>> at least every year. So, in summary, and
59:58please add on if I've missed out
59:59anything,
1:00:01the best thing to do is to top up your
1:00:03CPF special account, right, before you
1:00:06hit 55 cuz you earn interest
1:00:09compounding. So, I'll do that after this
1:00:11episode. And surplus is actually what
1:00:14makes you rich,
1:00:15>> right? First, you have to have the
1:00:16surplus. Before that, forget about
1:00:18investing,
1:00:20>> right? And if you want to invest, you
1:00:22have to do it regularly. And ideally, in
1:00:25my own experience anyway, through an ETF
1:00:27and anything else that is not
1:00:31a wise investment, you're better off not
1:00:34doing it.
1:00:35>> Yeah. So, if we if I may summarize it
1:00:39another way, not that you are wrong, I'm
1:00:42just adding on.
1:00:42>> I would love to hear your take. Yes.
1:00:44>> All of us, we have a money equation. It
1:00:46all starts with income. After take away
1:00:49after taking away our savings after
1:00:52taking away our fixed expenses whatever
1:00:55is left behind you can spend it on
1:00:57things that are not fixed your variable
1:00:59expenses the savings if we invest it
1:01:03compounded by returns over a number of
1:01:05years that will help us be able to live
1:01:07the life that we want to live. So there
1:01:10are two sides to this money equation the
1:01:12left side and the right side. The left
1:01:14side is the income minus savings minus
1:01:17expenses side. The right side is the
1:01:19invest get return compounded by many uh
1:01:22many many years side. Most people like
1:01:24to focus on the right side. They think
1:01:26it is the right side that will make them
1:01:28rich. They think it is the right side
1:01:30which is the investment side that is
1:01:31exciting and sexy. But actually the left
1:01:35side if it's not as important is even
1:01:37more important. Right? The left side is
1:01:40the boring poor boring financial advice
1:01:43side is the financial planning side. If
1:01:46we do the right side well the financial
1:01:48planning side we live below our means.
1:01:50We have emergency fund. We top up our
1:01:53CPA because that's the foundation. We
1:01:55have got good surpluses. The right side
1:01:58will take care of itself because the
1:02:00right side is the long-term investment
1:02:02strategy side. If your life left side,
1:02:04your financial health is very strong.
1:02:06You've got good surplus. When the
1:02:08markets are very volatile, on the right
1:02:09side, you can stay invested for the long
1:02:11term. The left side is the side that
1:02:14makes you rich. The right side is the
1:02:18side that helps you stay rich.
1:02:20>> And can I add this? I want to just share
1:02:23my own view, right? Because I'm going to
1:02:25turn 43 soon. And it only took me in the
1:02:29last recent years to get wiser about the
1:02:33right side. And it may be that I'm more
1:02:38emotionally mature or I've learned from
1:02:41making expensive mistakes which I wish I
1:02:43didn't but almost like I was telling my
1:02:46husband those were like tution fees like
1:02:48fay expensive right but sometimes
1:02:51you have to make those painful mistakes
1:02:53in order to learn otherwise you will get
1:02:57tempted by the you know the get-rich
1:02:59quick schemes you think I want to make
1:03:01my money work harder for me why is it
1:03:03that other people can make money so
1:03:05easily. How come it's like for me it's
1:03:07so difficult?
1:03:09>> Well, I think most people they do the
1:03:12right side which is the investment side
1:03:14better from because they learn from
1:03:17investment mistake.
1:03:18>> Okay. Everyone makes mistakes.
1:03:20>> The left side people take care of the
1:03:22left side better which is the financial
1:03:24planning side because they mature in
1:03:27their life. The right side is they learn
1:03:29from investment mistake. the left side
1:03:31is because they mature in their life.
1:03:34What do I mean? Well, as we grow older,
1:03:38we realize
1:03:40that there is no need to buy the things
1:03:43that we don't need with the money that
1:03:45we don't have to impress the people we
1:03:47don't even care.
1:03:48>> Mhm.
1:03:49>> And once we realize that in life, our
1:03:52expenses goes down. And when our
1:03:54expenses goes down, our surplus goes up.
1:03:56>> Yes.
1:03:57>> We learn that through maturity in life.
1:03:59M
1:04:00>> when we are young we are always trying
1:04:02to keep up with our neighbor and so we
1:04:06wear expensive watch wear expensive
1:04:08shirt or dress we carry expensive
1:04:11handbag the left side is always left
1:04:13with nothing right but with life with
1:04:16maturity we realize that these are not
1:04:19important things anymore right and
1:04:21therefore the left side become healthier
1:04:22and healthier and healthier the right
1:04:24side really we learn from investment
1:04:26mistake which is fine because making
1:04:28investment mistakes help us to become a
1:04:30better investor.
1:04:31>> Yes. Become who we are today. Thank you,
1:04:33Chris. I'm so glad. This has been very
1:04:36very educational and enriching
1:04:38personally for me. And you know, if
1:04:40you've enjoyed this episode, please
1:04:42share it with a friend. Don't be so
1:04:44selfish and keep it to yourself. Thank
1:04:46you, Chris, for coming. And yeah, maybe
1:04:48one day we can have you back again.
1:04:50>> Thank you.
1:04:50>> Thank you for answering the listeners
1:04:52questions. Thank you. Thank you.
1:04:53>> Thank you so much for tuning in. I hope
1:04:55you enjoyed the real reason. And if you
1:04:58did, please share it with your friends,
1:04:59your family, your colleagues, and join
1:05:01us next time on The Real Reason. See
1:05:03you.
1:05:13[music]

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