Does it mean we all must try our best to invest?
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2024 Year End Review & Dividends – 3rd slowest increase in cash dividends
since 2011
-
Although 2024 started off as a year where investors were anticipating
whether rate cuts would happen (rate cuts eventually happened on 18
September 2024)...
3 hours ago
Hi Uncle8888,
ReplyDeleteI'd say it's good to know/good to have.
Remember the personal finance pyramid?
There are more important/ fundamental aspects which if well taken care of, most people can do fine without needing to get into "investing". 😉
For those of us who have the interest & ability to muck around with financial markets, well, it's a bonus and a privilege! 😁
Our networth chart follows simliar trend in that in the initial years, the growth rate is low (very low gradient) and the rate of growth started to get faster as we get more established in our careers.
ReplyDeleteIn fact, I observed three separate regions of growth rate in our networth chart. In the initial ten to 15 years of our working career, the rate of growth was very low such that I would only update our networth chart every three months to half yearly period. It was like not moving.
In the second 10 year stretch, the rate of growth started to pick up, and I also started to update it every quarter and then monthly. Not only that, I also started to split up the networth chart into a liquid networth chart and an lliquid networth to better track the components in my liquid networth chart. The illiquid networth comprises our two properties and our monies in the MA, SA and RA. Obviously the illiquid networth grows at a slower clip.
It was in the last 10 year stretch that I update both charts every month because the growth rate becomes quite substantial. In the last five years, we were saving 100% and more of our earned incomes. We are in a situation of we are earning more and yet save more.
So the question is, is it our investment that is accelerating our networth growth or is it because we are earning more in our later years? Looking in detail into the data, I would say our investment (especially the passive income) helps in providing the "floor" or "foundation" from which our networth can grow faster with our earned incomes. In other words, the higher earned incomes in our later years were the accelerator to the higher growth in our networth while the investment was the enabler.
The down side of long only long-term investors is that Mr Market likes to press Reset button along the investing journey.
DeleteThose lost years in recovery from a big Reset!
Anyone started thinking on how to soften the impact of next Reset button pressed by Mr Market? How?
As long as we have money in investment, we face the risk of losses or "reset".
ReplyDeleteWe are trying to minimise this "reset" risk by channelling our later savings into our CPF, much to the consternation of SMOL. :-)
We do this to reduce our risk exposure to investment (in percentage terms) as we near and eventually go into retirement. This is consistent with the widely given advise that retirees should reduce exposure to loans and investment in equities and allocate more resources to income generating instruments.
Without earned income, retirees simply do not have the runway to rejuvenate their investment in equities after a reset, unless they have a huge warchest (like in their CPF OA).
As shared earlier, our approach is to build up our CPF savings sufficiently so that we can just live off the interests from our OA & SA, supplemented by the CPF Life payout (aiming for $110,000 a year). Any dividend and rental income will be the icing on the cake.
mysecretinvestment,
DeleteNo. There's no consternation; there's only bemusement poking ;)
Context is needed.
OLd fogeys like you who have made your CONCENTRATED pots of gold (in your case its multiple properties) OUTSIDE of CPF are not the target audience for those who espouse the virtues in voluntarily contributions of CPF.
Not when you can "easily" withdraw any excess CPF funds after age 65 ;)
If I'm big daddy, I would prefer any voluntarily contributed CPF funds stay locked-up longer as in decades? No?
Then there are youths who know how to "take full advantage" of their voluntarily contributions from their early 20s or 30s.
Yes, they do voluntarily contribute "extra" into CPF. but these youths will pull every cent allowed OUT from CPF making investments with CPFIS or using CPF to buy property to the max allowed.
Hey! CPF is a great "parking lot" for opportunity funds! (Different from savings OK?)
Their CPF is like during your early days - pitifully "low" despite their extra voluntary contributions ;)
So there you go!
When people say they voluntarily contribute to CPF, there are 2 groups:
1. The EARN MORE savvy ones who are milking the system to the hilt!
2. The SAVE MORE salt of the earth ones who don't know they have given up what you call as "enablers" ;)
Like buying fish, no poke how to tell the difference?
Readers who didn't know your back story may be forgiven to think you are "risk adverse" like them...
LOL!
Have different take. Am a long term buy & hold investor, not worry about "reset", have went through these several times since Black Monday 1987. Issue is whether counters wound rebound after the crisis, i.e., prices went down because of general market sentiment and not because of changes in company fundamentals. Have learnt from bitter experiences to only pick counters with good fundamentals and consistent and sustainable dividends such as DBS, SGX, Haw Par. Actualy had accumulated more of such counters at each "reset".
ReplyDeleteCould refund CPF withdrawn for property purchases to boast OA & SA, but decided not to. Have topped up wife & own RSS to Enhanced & prevailing max for the year every year. Plan to withdraw at 67 or later, by then combined payout should be about $5000/month, a good enough safety net. Instead, cash is invested in several asset classes, with different risks. From almost "zero" risk annuities (private version of "CPF Life"), to slightly higher risk bonds funds to reits and dividend generating equities. Expect to generate average ~5% yield from these diverse investments to provide the remaining 75% regular passive income.
No body is sure, for simple retail investors with incomplete info like us, best guide is history + a little analysis of the impacts of the root cause of the crash on the company's operating environments. If a company with good fundamentals (healthy balance sheet, consistent & stable earnings for last 5/10 years etc) recovered from all previous crashes, chances are it would also recover from the present crash, unless the root cause of the crash has changed the business landscape (e.g., SIA & COVID). Agreed it is still a Tikam, even for WB.
ReplyDelete