Answering common questions from Singapore Investors [Ask FH]


I know that I’ve been a bit slow with this edition of Ask FH, so my sincere apologies. I’ve spent the last 9 months trying to condense everything I know about investing into an online course (the Complete Guide to Investing for Singapore Investors), and I truly believe it is the best framework for investing for Singaporean investors out there today. If you’re an investor who is unsure about your current portfolio and asset allocation, going through the FH course can really benefit you, as the course will teach you a sound framework to further your investing journey.

The early bird / national day promo lasts until this Sunday (tomorrow!), so do take advantage while the promo is on, if you’re keen.

Otherwise, you’re always free to browse the resources on this site. As always, if you have any burning questions on investing at all, drop me an email at [email protected] with the subject title [Ask FH], and I’ll respond to you via an article. Life does get in the way sometimes, so do forgive me if I take some time to churn out an article.

Note: I’ve tweaked/omitted some of the information below to protect the privacy of the readers, and to avoid providing personalised advice. Accordingly, any resemblance with a person you know is purely coincidental. Please note that this article should not be construed as formal investment advice. If you are uncertain as to the steps you should take, please consult your stockbroker or a financial advisor. 🙂

Dear FH,

I chanced upon your website and see that you give advice to people who don’t know much about investing. So I am writing in to seek your opinion.

A little background, I’m in my late 20s, and received a sizeable inheritance, been reading up on pros and cons about lump sum vs dollar cost averaging strategy but it got me more confused.

In your opinion, is it better to do lump sum investment or Dollar cost averaging at the current market condition.

Interesting enough, this was one of the first topics I covered in the FH Complete Guide to Investing for Singapore Investors.

Long story short, multiple studies show that lump sum investing beats out dollar cost averaging most of the time, over the past 30 years.

But such studies don’t take into account the psychological impact of having to invest large sums of money at one go. It’s easy to think about investing a S$1 million inheritance, but actually going about and executing the buy orders, only to watch the stock market tank 10% a month later and translating into a S$100,000 paper loss, can be absolutely nerve wracking.

So if it were me, I would probably dollar cost average. As I shared in a couple of previous articles (here and here), I also think the next year or two could see some volatility, so averaging in over a longer period might be a good idea. But of course, that’s just my take, and you should decide how best you want to do it for yourself. ?

Dear Financial Horse,

First off, would really like to thank you from the bottom of my heart for starting this blog and sharing your wisdom and knowledge with your readers. Your articles are really well written and easy to digest especially for novice investors like myself; I have gleaned many insights and am always looking forward to your next article!

I am a 23-year-old student who just got started investing. I have about $30,000 to get started, and am virtually risk-free as I am fortunate enough to be born into a relatively well-to-do family that can support me should things go awry. 

My skeletal plan for a portfolio is as follows:

10% ($3000) – Stashaway

30% ($9000) – S&P500

20% ($6000) – Hang Seng Index

26.6% ($8000) – SREITs

13.3% ($4000) – Singapore Equities

As you can probably tell, your articles has had a great influence on me as I have taken into account many of your tips when creating this portfolio. As I have a very high risk tolerance, I have decided to go 100% into stocks. I have also tried to diversify my asset allocation with 40% US Equities, 20% China Equities and 40% Singapore Equities, as well as follow the “barbell” method, though I’m still not entirely sure what counts as “yield” and “growth” stocks. 

My questions are:

  1. Is this portfolio allocation well balanced? 
  2. My decision to allocate 10% of my portfolio to Stashaway is to diversify my investments in the US. Does this make sense or should I invest fully in S&P500?
  3. If say I were interested to invest 10% of my portfolio in Capitaland Retail China Trust, should I reduce my investment in the Hang Seng Index to “balance out” the foreign equities proportion in the portfolio?
  4. Should I wait for the next market correction before investing or simply invest fully immediately without trying to time the market?
  5. Any other words of advice?

I actually really like your portfolio. I think that your biggest advantage, like you pointed out, is that you have a relatively large sum of money at a young age, and you’re able to take risks with your investments. Given your age, you could take a higher risk asset allocation and do something with higher weightage to stocks, which it seems like you’re doing here.

When you are young, the most important thing to focus on is building up financial knowledge, and avoid making big investing mistakes. For me personally, it took years of reading books and articles, talking to people in the industry, and mistakes in the financial markets before I started understanding the basics of what was going on. Even today I know that there is so much more to learn about financial markets. Adopting a “forever-learning” mindset will help you grow as an investor.

The key bit I wanted to point out about your portfolio is that this is only the equity portion of your net worth. Don’t neglect your bond, gold/commodities or cash components as well. You should look at your asset allocation in totality, and understand how you’re allocated to equities, bonds, gold/commodities, cash (and later on in life, property), because all of these components will come together to determine your financial performance. A lot of investors focus on stock picking, when actually by far the biggest determinant of your future returns is asset allocation. Because this is so important, the FH Course actually provides in-depth guidance for asset allocation and there are also sample asset allocation templates, so the course will be helpful to assist you in this area if you’re so inclined.

One final note of caution. It’s easy to look at the past 10 years of stocks going up, and extrapolate that into the future. But the real world seldom works that way.

I genuinely think that there’s about to be a regime change in financial markets in the coming years, that would signify a paradigm shift in risk-reward of global assets. So it’s important to be nimble, and open minded in such times. Read widely, talk to people in the industry, and ask the right questions. The world will change in the coming years, and given your age, you can definitely position yourself well to capitalise on such changes, whether professionally, or personally in your investments. ?

Hello Financial Horse

I really hope you can advise. I am a 49 year old single male who works for himself. My income is very unstable and I don’t have any income starting Aug 2019. I’d like to know under what situation should I pay off part of my HDB loan so as to reduce my monthly mortgage.   Here are the facts:

 Outstanding HDB loan $148K

  1. FD and SG bonds $70K
  2. Monthly mortgage but with increasing interest rate. $1100/month at about 2% interest
  3. Savings of about $20K
  4. Not taking into account other fix costs like insurance, health, etc

Based on this are you able to advise? And are there any general rules to consider before deciding whether to pay off parts of my mortgage? Thank you!

Hello! Thanks for reaching out!

If I were in such a situation, I think the general principle is that:

(1) I would always keep an emergency fund of 6 to 12 months expenses, depending on how secure I expect my future income to be. Reduce expenses as much as possible to build up this emergency fund as soon as possible; and

(2) After the emergency fund, I would take any money that is earning less than the mortgage interest, and use that to repay the mortgage. Eg. If I were holding a bunch of SGS Bonds at 2.0% but the mortgage rate is 2.5%, I’d probably take some of the bonds to repay the mortgage. But if I were investing in blue chip REITs with a 5% distribution, and the mortgage rate is 2.5%, I’d leave the money in REITs and keep the mortgage.

Of course, there is a lot of context I don’t know here which makes it difficult to advise, but generally I would advise you to be conservative and keep your risk low since your income fluctuates.

Hi Financial Horse,

I am a university student who is taking some time this summer to learn about investing and hopefully get started myself soon. I’ve noticed a lot of Robos and DIY investors like to invest in US bonds. I understand that the SG govt also offers bonds, but why are US bonds favoured more over the SG bonds? Is it because SG bonds cannot be traded and are fixed returns?

Also, I would like some advice regarding ETFs and REITs investments. After reading your reviews of StashAway and Autowealth, I’m quite motivated to try doing ETF investments on my own instead of through a Robo. As I understand from your articles and various other sources, the best way to do so is by opening an account with Saxo, which as a minimum opening amount of $3000. As a student, $3000 is not a small sum, yet I understand the value of starting investments early. However, pouring in $3000 into ETFs means I will have less money available for investing in REITs. Do you think it is wise to start investing in both simultaneously? If not, and I should choose to start investing in 1 before the other, which would be better for me to start investing in first?

Thank you for your time, I greatly enjoy your content on FH. Keep it up!

You’re absolutely right. US Treasuries are good because of their liquidity, and as the deepest bond market in the world (and reserve currency status), there is highly efficient price discovery for US Treasuries. By contrast, SGS bonds have far less liquidity, and it’s a lot harder to exit positions efficiently. Instead of SGS bonds, I often recommend SSBs to beginner investors as it’s both safe and flexible.

I always think that when you are young, the paramount objective is to focus on building knowledge. The amounts you are investing at this age will not make a great difference when you are older and drawing a decent salary, so focus more on improving your financial knowledge and decision making. In this regard, there’s no need to do both ETFs/stocks and REITs at the same time. With the S$3,000, decide whether you want to go into stocks or REITs. Narrow them down to certain counters that you like, and pick one or two to invest in. Starting is everything. As Nike says, Just Do It!

Track your counters’ performance broadly over the next few years. Understand why you did well, or why you lost money. In the meantime, continually work hard to build up your disposable cash so you can invest more.

If you follow a process like this, and continually question yourself, you’ll find that you’ll slowly be able to gain a deeper understanding of how financial markets work. This way, when you get older and you’re drawing a higher salary, you wouldn’t be scrambling to understand markets and trying to find the best way to deploy your cash then. When you have more money to invest, this also means you have more money to lose. Start early and learn as much as you can, you won’t regret it. The focus here should be on learning, rather than the absolute return of the investment itself.

Or at least… that’s how I would do it. But of course, you could also just sign up for the FH Course and speed up your learning process ? (FYI, for interested readers, please do take note that the early bird pricing ends tomorrow!)

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