how Singaporeans can invest smart and retire wealthy

#44 – Rich by Retirement – How Singaporeans can invest smart and retire wealthy by Joshua Giersch

dear kafka,

i know you’re a 15 year old boy and do not live in Singapore but others who read this newsletter may find this useful.

i like this book – short and easy to understand, has sound principles that can be easily applied, and cost USD 10 on the Amazon Kindle store.

here are the 8 steps to retiring wealthy:

1. Start an emergency fund

  • a simple deposit account with your local bank
  • separate from your regular bank account
  • Six months of your monthly expenses
  • Immediate access when needed
  • Only for use in an emergency

2. Insure yourself

  • Hospitalisation insurance – “Medishield Life plan is perfectly good”
  • Term life insurance – for those with dependents – Buy term life insurance  to cover dependents for minimum 5 years’ worth of expenses

3. “Invest “110 minus your age” into stocks and the rest into bonds” – for example, if you are 40, 70% of your money will be invested in stocks, 40% in bonds.

4. Stocks pile

  • invest 50% in a Singapore ETF  – ES3, SPDR Straits Times Index ETF
  • another 50%  in a global-stock ETF – IWDA, the iShares Core MSCI World ETF.

5. Bonds pile – 100% invested in an ETF of Singaporean bonds – A35, the ABF Singapore Bond Index Fund.

However, if you’re saving for retirement only and not a shorter-term goal, consider putting money into CPF Ordinary or Special Accounts where the interest is higher.

Also, you can treat your CPF savings as bonds, meaning you can invest more in stocks.

6. “Each month, invest a regular amount into those same exchange-traded funds; put it into whichever fund you’re short of.”

Which brokers to use?

investing <$1000 a month – POSB Invest-Saver account for Singapore stocks and bonds; Standard Chartered account for overseas stocks.

investing >$1000 a month- Standard Chartered for Singapore stocks and bonds, and Interactive Brokers account for overseas stocks.

7. “Twice a year, in May and November, rebalance your portfolio—sell and buy the exchange-traded funds to bring your portfolio back to the “110 minus your age” proportion.”

8. “Go to the pub” – relax and go live life.

Other things I learnt

“Term life insurance is vastly cheaper than whole life insurance: anywhere from 80% to 90% cheaper for the same amount of coverage; or, equivalently, you can buy five to 10 times as much coverage for the same price. ”

“Let’s assume that you’re about 30 years old right now, and you want to retire at age 65. How much money do you need to save per year to hit that million-dollar goal? The answer is just $800 a month”

“The easiest way to improve your investment returns is to pay less in fees.”

“If your broker charges you more than 0.2% to trade Singaporean stocks, that’s too much. Fire your broker! If he charges more than 0.3% to trade UK or US stocks, that’s too much. Fire your broker again!”

Managing your money yourself is best.

“at the time I write this, Standard Chartered charges 0.2% to buy or sell Singaporean shares, with a $10 minimum”

The secret – Managing your returns by balancing stocks with bonds in your portfolio.

Don’t invest your CPF money. Leave it alone.

Never buy any investment product from an insurance company. Never.

“The 2008 crash was horrendous. A lot of people lost a lot of money, and if they panicked and sold in 2009, they locked in those losses. But the Singaporean stock market bounced back fast. Including dividends, it was nearly back to its pre-crash highs by the end of 2010.”

“The best way to combat emotion is to have a strong set of rules and stick to them”

“A good rule of thumb, then, is don’t invest in anything with high fees or anything with hidden fees.”

How much can you withdraw from your portfolio during retirement – 3% – “that’ll cover 2% inflation and a measly 1% growth in your account… So if you have a million-dollar retirement pot, you can withdraw about $30,000 from that each year—and if you have a good year, you can withdraw a little more to enjoy yourself.”

Mark Zuckerberg inspired me to start an annual personal project – read a non-fiction book every week and write about it. 

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