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The basics are the most important.
ReplyDeleteI've seen quite a number ex-colleagues & relatives able to retire relatively comfortably in their late-50s to early-60s without much investing experience. A few have rental property investments, but the majority are simply strong savers. They were earning just average or slightly-above average salaries. Hence I think strong savings habit and having protection against catastrophic losses/events are the most important attributes to being able to retire.
This is the foundation.
As for investing, usually when investment noobs start asking for tips, techniques, knowledge transfer, secret sauce, etc --- it's when various markets have already been on bull run for some time, & some assets already quite expensive. I'll be quite wary if the target audience are middle-aged 40s & above. Short answer is start very small & start slow; read a lot & be prepared to have losses. Some things just cannot learn without going thru the good & bad experiences.
I always like to show the charts of 2000-2002 and 2008 to my friends. That's what will happen to their $200K or $500K capital. Are they prepared??
I'm a wet blanket ... Kekeke!!! For those middle-aged or with kids to support, I'll suggest focus on aggressive savings & reading up & only think about investing during the next recession.
If want to dip toes into stocks, then start small using the various DCA plans by some banks & online brokerages e.g. monthly $100 or $200 into STI ETF or REIT ETF or blue chips.
When all these go DEEP RED during next big downturn --- then check their emotions --- are they scared to deploy their war chests??? Or excited to buy bargains??? That will reveal truth to themselves!!
For many people, they are better off having large emergency funds and regular top-ups to their CPF!! Heheh!!
BTW the SPDR STI ETF has returned 7.55% compounded returns since it started in Apr 2002. But this is with dividends reinvested regularly. I suspect the returns will be even better if you save up the dividends & only reinvest whenever STI drop at least -20% or -30%.
http://www.spdrs.com.sg/etf/fund/ref_doc/Fact_Sheet_STTF.pdf
Agreed on strong savers of more than 60% of earned income; they can less focus on investment to increase their net worth.
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