InvestAble

Tag: Investment

  • Should You Work with a Fee-Based Financial Advisor? Here’s What You Need to Know

    Should You Work with a Fee-Based Financial Advisor? Here’s What You Need to Know

    Should You Work with a Fee-Based Financial Advisor? Here’s What You Need to Know

    When it comes to financial planning, finding the right advisor is just as important as making the right investment choices. Many investors today are exploring fee-based financial advisors as an alternative to traditional commission-based advisors. But how do these advisors work, and is it worth paying for their services?  

    Let’s break down what you need to know about fee-based financial advisors, how they differ from commission-based advisors, and why fee-based planning remains less common in Singapore despite its benefits.  

    Why Do People Look for Fee-Based Advisors?

    One of the biggest reasons investors seek out fee-based financial advisors is to eliminate sales pressure. When working with a fee-based advisor, you’re paying for professional guidance—not for buying financial products. This means the advisor’s income isn’t dependent on selling specific investments, insurance, or other financial products.  

    With commission-based advisors, there’s always the potential for conflict of interest, where the advisor’s recommendations might be influenced by which products offer the highest commissions. Fee-based advisors remove this concern by ensuring they are compensated only by the client, aligning their interests directly with the people they serve.  

    How Fee-Based Advisors Charge for Their Services

    Fee-based financial advisors use different pricing structures based on how involved they are in managing your finances. Generally, these are the most common models – 

    Flat Fee for a Financial Plan

    • You pay a one-time fee for a customized financial plan.

    • The advisor provides you with recommendations, but it’s up to you to execute the plan.  

    Ongoing Advisory Fee

    • You pay a recurring fee (typically annually) for the advisor to implement and manage your financial plan.
    • This model includes regular reviews, investment adjustments, and financial check-ins.

    The key takeaway here is that fee-based advisors charge for advice, not transactions. This allows them to focus entirely on what’s best for you, rather than what generates the highest commission. 

    How Are Fee-Based Advisors Different from Traditional Commission-Based Advisors? 

    Most financial advisors in Singapore operate on a commission-based model, which means they earn commissions from the financial products they sell, such as insurance policies and investment-linked products. While many commission-based advisors provide excellent service, their income structure creates inherent conflicts of interest.  

    Challenges with the Commission-Based Model 

    A commission-based advisor must keep selling products to maintain income. Their revenue stream is driven by –

    • Finding new clients to sell products to.  

    • Selling new products to existing clients, even if they may not need them.  

    • Recruiting new advisors to earn an override from their sales (common in multi-tier advisory firms).  

    While there are ethical and competent commission-based advisors, the fee structure itself influences behavior, often leading to – 

    • Selling higher-commission products over lower-cost alternatives.  

    • Encouraging clients to buy additional insurance or investment products even if they don’t need them.  

    • Prioritizing transactions over long-term financial planning.  

    The reality is that the quality of service a client receives under this model is heavily dependent on the individual advisor’s moral compass. Some advisors successfully balance ethics and commissions, but others may prioritize their income over what’s truly in the client’s best interest.  

    How Fee-Based Advisors Solve These Issues

    Unlike commission-based advisors, fee-based advisors earn their income mainly from client fees. This structure provides several key benefits –

    • No pressure to sell specific products – The advisor gets paid the same amount regardless of which recommendations they make.  

    • No bias toward high-commission options – Investments and insurance recommendations are based purely on merit, not commissions.  

    • Greater focus on financial planning – Fee-based advisors prioritize long-term strategy over one-time sales.  

    • Alignment of interests – The advisor’s success depends on delivering high-quality advice, not on selling products.  

    Ultimately, the core difference between fee-based and commission-based advisors is how they are compensated. The former gets paid for guidance, while the latter gets paid for selling financial products.  

    If Fee-Based Advice is Better, Why Isn’t It More Common? 

    Despite its benefits, fee-based financial planning is still relatively rare in Singapore. Why?  

    Consumers Often Prefer “Free” Advice Over Paying Fees

    Many consumers balk at the idea of paying a visible fee for financial advice, even though commission-based advisors still get paid—just in a less obvious way.  

    When working with a commission-based advisor, clients typically don’t realize how much they’re indirectly paying because –

    • Commissions are built into the product’s pricing, so clients don’t see the costs explicitly.  

    • Fees are often hidden in long, complex documents that most clients don’t read.  

    • Some products (e.g., investment-linked insurance) have high embedded fees, making them more expensive over time compared to alternatives.  

    In contrast, a fee-based advisor clearly states their fee upfront, which some clients perceive as an “extra” cost, even though they may end up paying more in hidden commissions with a traditional advisor.  

    The Commission Model is the Industry Norm

    Because most financial advisors in Singapore work on a commission basis, the industry itself promotes this model. Consumers are far more likely to encounter commission-based advisors, making them the default choice simply due to visibility.  

    Moreover, commission-based advisors often work for large firms with strong marketing budgets, while fee-based advisors operate independently and rely more on referrals. This means many investors may never even come across a fee-based advisor unless they actively search for one.  

    Becoming a Fee-based Advisor is Challenging

    For an advisor, transitioning to a fee-based model is difficult. The commission-based system provides –  

    • Immediate income from product sales.  

    • A steady stream of commissions from previously sold policies.  

    • A structured career path where selling more means making more.  

    In contrast, fee-based advisors must –

    • Convince clients to pay for advice instead of getting “free” commission-based planning.  

    • Build a reputation and client base from scratch without relying on product sales.  

    • Constantly prove their value to clients, since they aren’t making money from transactions.  

    It’s a much tougher business model, which is why many advisors choose the easier path and stick to commissions.

    So, Should You Work with a Fee-Based Advisor?  

    If you’re looking for truly unbiased financial advice, a fee-based advisor may be the right choice. They align their interests with yours, focus on your long-term financial well-being, and don’t rely on product sales to earn a living.  

    However, that doesn’t mean all commission-based advisors are bad. Some are highly ethical and prioritize their clients’ best interests despite the structural conflicts. The key is understanding how your advisor gets paid and whether that affects their recommendations.  

    How to Choose the Right Advisor for You

    • If you want unbiased advice and are willing to pay for professional guidance, a fee-based advisor is the better option.  

    • If you prefer not to pay upfront fees and are comfortable navigating potential product bias, a commission-based advisor may still work for you.  

    • If you’re unsure, ask questions about how the advisor is compensated and how they make their recommendations. A good advisor — whether fee-based or commission-based — should be transparent about their fees and willing to put your interests first.  

    At the end of the day, what matters most is finding an advisor you trust—one who prioritizes your financial goals over their own commissions. Understanding these differences helps you make a more informed decision about who you entrust with your wealth planning.  

    By shedding light on how different advisors operate, I hope this article helps you navigate the world of financial planning with greater clarity. If you like an honest second opinion on your current approach, we offer a complimentary initial consultation to offer clarity.

     

  • Worried about high valuations? Here’s how using a low-cost active strategy can help.

    Worried about high valuations? Here’s how using a low-cost active strategy can help.

    Worried about high valuations? Here’s how using a low-cost active strategy can help.

    Lately, there’s been a lot of buzz about the market, especially worries over high valuations. The Magnificent 7 stocks are holding a significant chunk of the market, and many are concerned that if these major players experience a downturn, it could bring more volatility to your portfolio.

    To address this, an approach might be to diversify and rebalance your investments to lower the overall valuation. One way to do this is by exploring an equal-weighted S&P 500 fund instead of the traditional market cap-weighted S&P 500 index. To help you understand the potential benefits, let’s take a closer look at the historical performance of the S&P 500 from 1974 to 2019.

    Exhibit 1 – Summary of Historical Performance, July 1974–December 2019

    Returns

    From July 1974 to December 2019, an equal-weighted index simulation delivered impressive results, outperforming the traditional market with an average annual return of 13.8% compared to 11.8%. While these numbers show a stronger return, it’s important to remember that higher returns aren’t the only thing that matters—keeping risks in check is equally vital.

    Risk Management

    The equal-weighted portfolio is more volatile, with an average annual standard deviation of 19.9% compared to 15.5% for the market-weighted portfolio. This higher volatility occurs because equal-weighted indexes don’t incorporate real-time information about individual companies or the broader market, leading to less effective risk control. 

    For example, if some companies in the portfolio are heading towards bankruptcy, the equal-weighted approach continues to allocate the same weights to both struggling and profitable companies, increasing overall risk.

    Costs

    Equal-weighted strategies require frequent rebalancing, which results in much higher trading activity compared to the traditional market approach—about 32% versus 6% (refer to the  Exhibit 2). This increased trading means higher expenses, and those extra costs can eat into your overall returns.

    There are three key differences between equal-weighted and market-weighted portfolios: equal-weighted portfolios often achieve higher returns, experience greater fluctuations in value, and incur higher trading costs compared to market-weighted portfolios.

    So.. what is the solution?

    We compare our low-cost core strategies with a focus on small-cap, value, and profitability within the same timeframe.

    Returns & Risk Management

    Our core strategy utilizes market prices to adjust the weights of securities, preventing extreme deviations and maintaining a balanced approach to over- and underweighting. From our observations, the core strategy not only delivers higher returns than the traditional market approach but also manages risk more effectively, achieving similar returns to the equal-weighted strategy with lower volatility.

    Exhibit 2 – Average Annual One-Way Turnover by Strategy Weight, July 1974–December 2019

    Costs

    When it comes to costs, both the Equal-weighted and our Core strategy involve more trading activity than the market. However, our Core strategy has a lower turnover rate, which means you’ll incur fewer trading fees overall.

    Recent Observations

    Another timeframe when technology company valuations were soaring spanned from 2000 to 2009, overlapping with both the dot-com bust and the global financial crisis. During this challenging period, we compared our Core strategy against the S&P 500 to assess performance and resilience.

    Exhibit 3 – Performance, Monthly: 01/01/2000 – 31/12/2009

    With $100,000 invested in our core portfolio from 2000 to 2009—it would have grown by 46%, reaching a total of $146,000. Meanwhile, the S&P 500 would have taken a hit, ending the decade with a loss of 9%.

    In short, while passive index investing is certainly valuable, active strategies like ours offer significant benefits by helping investors achieve higher returns for each unit of volatility risk they take on.

  • How to Choose the Right Financial Advisor: 4 Key Questions to Ask

    How to Choose the Right Financial Advisor: 4 Key Questions to Ask

    How to Choose the Right Financial Advisor: 4 Key Questions to Ask

    Choosing a financial advisor is more than just finding someone who knows the numbers. It’s about finding a partner who understands your goals, values, and unique financial journey. Here’s how to determine if an advisor is the right fit for you.

    Philosophy

    “What is your approach to wealth management?”

    An advisor should always align with your goals, whether it’s building wealth, retiring comfortably, or creating a legacy.

    You’ll want to look for a philosophy rooted in transparency, and clear strategies to deliver long-term results.

    Services Offered

    “What’s included in your scope of services?”

    Your advisor should offer comprehensive services that cover your financial life—from investment strategies to appropriate planning beyond just selling a product. The services should include –

    1. Wealth Enhancement: Portfolio management, retirement planning, and mortgage advisory.

    2. Wealth Transfer: Estate planning, wills, and advanced medical directives.

    3. Risk Protection: Insurance advisory and asset protection.

    The Process

    “How will we work together?”

    The process you’re looking for should be a clear, step-by-step process that ensures transparency and alignment. Look for the following.

    1. Discovery Meeting to understand your goals and important considerations.

    2. Roadmap & Recommendations for a tailored report to achieve your aspirations.

    3. Proper Implementation to set your roadmap in motion with precision

    4. Post-Implementation Reviews that address both investment, and non-investment goals.

    5. Annual Year Check-Ins to ensure alignment of your portfolio with your evolving life.

    Fees

    “What am I paying for, and how is it structured?”

    Understanding the fees involved helps you to see the value of the services provided. The fees are typically broken down into 3 parts, as listed below.

    1. Planning: A one-time fee for a personalised financial roadmap.

    2. Implementation: Covers portfolio creation based on your roadmap.

    3. Ongoing Management: Regular advisory to adjust strategies and ensure long-term success.

  • Case Study: Entry level into suitable asset class allocation for new investors

    Case Study: Entry level into suitable asset class allocation for new investors

    Case Study: Entry level into suitable asset class allocation for new investors

    The case

    “I’m a single 40 year old male with net savings of $65K and no debt or commitments. what sort of allocations would be suitable?”

    My current personal assessment is:

    $15K in cash

    $25K in medium-liquidity assets with a 3 to 6 month lock in

    $15K in low-liquidity assets with a 12 to 18 month lock in

    $10K in equity

    Is this reasonable or way too conservative?

    Recently, we came across a question on Reddit that we feel resonates with many new investors. “Is my allocation too conservative?” is a common concern for new investors.

    The approach

    Start with your goal

    Begin with the end in mind. Ask yourself: What are you investing for? For this example, let’s assume the goal is retirement at 65 with a portfolio that generates $3,000 monthly income. With 25 years to invest, you’d need roughly $1M by 65.

    Determine your need for return

    To reach $1M in 25 years starting with $65K  and a $1,000 monthly contribution, the required return (or need for return) is around 6.3%. This means a portfolio allocation like 70% global equities and 30% bonds is likely needed to hit that target.

    Understand the risk

    A 70/30 portfolio typically has an annualised standard deviation of around 9.83%. This means your portfolio could go up or down by that amount in an average year. Can you emotionally handle periods of decline, potentially as steep as 9% or more, without selling? If not, you may need to adjust your risk tolerance or expectations.

    Investing isn’t just about numbers—it’s about behaviour

    Sticking to a plan, especially during downturns, is critical. Emotional decisions often derail long-term goals. This is why many people turn to advisors, not just for portfolio management but for guidance and discipline throughout the journey.

    Re-assess as life changes.

    This isn’t a one-and-done decision. Over time, as your investments grow or your circumstances change, revisit your portfolio. You may want to reduce risk as you get closer to retirement or adjust based on changes in income or goals.

    By focusing on goals, understanding how much risk feels right for you, and regularly fine-tuning your approach, you can make choices with confidence to reach long-term success.

    Source: Dimensional Fund Advisors Ltd, Dimensional Global Core Equity Index, Bloomberg Global Aggregate Bond Index

  • Nokia’s Transformation: From Mobile Giant to Network Innovator

    Nokia’s Transformation: From Mobile Giant to Network Innovator

    Nokia’s Transformation: From Mobile Giant to Network Innovator

    Many of us remember Nokia as the titan of the mobile phone industry, the brand that defined the early era of cellphones with its nearly indestructible models and memorable ringtones. To many, it seemed Nokia’s reign might have quietly faded into the annals of tech history, overshadowed by the rise of smartphones. However, the truth is far from it. Nokia has not just survived; it has evolved, transforming its core business in a bold move that showcases its adaptability and forward-thinking approach.

    The Transition of Nokia’s Core Business

    Nokia, once synonymous with mobile phones, has undertaken a significant shift in focus under the guidance of CEO Pekka Lundmark. The company has rebranded itself, shedding its 60-year-old logo and mobile phone identity to emerge as a leader in networks and industrial digitalization. This pivot reflects Nokia’s ambition to pioneer the future where networks meet cloud technology, marking a complete strategy overhaul.

    This transition saw Nokia stepping away from phone manufacturing a decade ago to concentrate on telecommunications infrastructure and technology sectors, including pivotal areas like 5G networks, cloud services, and software-defined networking. While Nokia-branded phones continue to exist, thanks to HMD Global, Nokia’s own journey has taken a different path, emphasising its expertise in B2B technology innovations and its extensive portfolio of telecommunications and mobile technology patents.

    Adapting to Market Conditions: Lessons from Nokia

    Nokia’s journey teaches us the critical importance of adapting to market conditions. Recognizing the shift in the industry and consumer needs, Nokia understood that its strength and future lay not in fighting an uphill battle in the smartphone market but in leveraging its vast experience and capabilities in network technology. This strategic pivot, though daring, highlights a vital business principle: it’s never too late to adapt to changing market dynamics.

    Applying Nokia’s Principles to Portfolio Rebalancing

    The story of Nokia’s transformation mirrors the essential practices of successful investment, particularly portfolio rebalancing. Just as Nokia reassessed its core business and shifted its focus to align with future growth areas, investors must regularly evaluate their portfolios and adjust their asset allocations in response to changing market conditions and personal financial goals.

    Portfolio rebalancing is not about conceding defeat; rather, it’s about recognizing when the landscape has changed and adapting your strategy accordingly. It’s about knowing when to hold on, when to let go, and when to diversify into new territories to ensure sustainable growth and stability.

    Nokia’s partnership with Dell Technologies exemplifies its commitment to innovation and adaptability. By collaborating on advancing open network architectures and private 5G use cases, Nokia is not only expanding its footprint in the telecom ecosystem but also setting new standards for how businesses leverage network technology.

    Conclusion

    Nokia’s evolution from a mobile phone behemoth to a network and industrial digitalization pioneer serves as a compelling case study in adaptability, innovation, and strategic foresight. As Nokia continues to redefine itself and lead in its chosen domains, it offers valuable lessons for businesses and investors alike. 

    The key takeaway is clear: success lies not in clinging to past glories but in the ability to anticipate future trends and pivot accordingly. In the dynamic landscape of technology and investment, being adaptable is not just an advantage; it’s a necessity.

  • Case Study: Paying down mortgage vs. investing

    Case Study: Paying down mortgage vs. investing

    Case Study: Paying down mortgage vs. investing

    Embarking on the journey of homeownership often prompts a pivotal question: Should you direct your resources towards paying down your mortgage or invest? In this article, we dissect the crucial factors that guide this decision-making process, shedding light on interest rates, risk tolerance, and time horizon.

    Interest Rates and Returns

    At the heart of the dilemma lies the balance between the interest rate on your mortgage and the potential returns from investments. Understanding this interplay becomes paramount, as it directly influences the allocation of your financial resources.

    Risk Tolerance

    Consideration of your risk tolerance forms the backbone in this decision-making process. Mortgage payments assure a guaranteed return by chipping away at your debt, while investments introduce risks.

    Time Horizon

    Investing often thrives as a long-term strategy, reaping benefits over an extended period, while paying down a mortgage yields immediate advantages. We guide you through the evaluation of your time horizon, urging alignment with your unique financial goals and timeframe.

    Case Study

    Let’s look at a real-world scenario. Imagine you as a homeowner with a S$1 million mortgage, a 25-year loan period, and a 3% per annum interest rate. It would work out to something like this –

    In the initial years, a significant chunk of the fixed monthly payment is allocated to covering interest expenses. However, the percentage of the monthly payment that goes toward interest decreases over time.

    At the end of 25 years, your total cash outlay (incl. interest) is estimated at $1,422,633.94, meaning your total estimated interest paid is $422,633.94.

    What if you were to make an additional $500/month principal repayment?

    By doing so, you would finish paying off your mortgage around 3 years earlier with a total cash outlay of $1,360,445.13 with interest paid at $360,445.13. That means you would have saved $62,188.82 in interest payments.

    Now, let’s look at what happens if you invested the $500/month instead.

    Assuming you get an annualised return of 7%, this is what it will look like –

    If you were to invest, you would have a total portfolio value of $304,937.65 with $174,937.65 in total returns. Your investment returns would be worth more than double compared to your interest savings of $62,188.82.

    And if you were to continue investing $500/month until the end of 25 years, you would have a portfolio value of $407,398.56 with $257,398.56 in total returns.

    As the numbers are laid out, the choice becomes clear. However, remember that the challenge lies not in making the choice but in creating and managing a portfolio capable of delivering an annualised return of 7%.

    Whether you opt for the stability of reducing mortgage debt or the potential growth offered by investments, the key lies in aligning these decisions with your unique financial goals.

  • Are all investments risky?

    Are all investments risky?

    Are all investments risky?

    Navigating risks of asset classes

    Understanding the associated risks is key to making informed decisions. Whether you’re a seasoned investor or just dipping your toes into the financial world, recognising the risk spectrum is crucial. Let’s take a closer look from the safest to the riskiest investments, demystifying the complexities along the way.

    Cash – The Foundation of Security

    The safe haven at the foundation of the risk pyramid lies cash. Holding physical currency or maintaining funds in a bank account provides liquidity and safety. However, the trade-off is low returns, and over time, the value may erode due to inflation.

    Bonds – Stepping into Stability (slow and steady)

    Stepping into Stability Moving up, we take a look at bonds, a debt instrument. 

    In short, you are lending money in exchange for “interest”, which is known as the coupon. 

    Government bonds are considered low-risk, providing a fixed interest rate and return of principal at maturity. They offer stability but might have lower returns compared to bonds issued by companies (Low risk, low returns).

    Investment grade bonds are bonds issued by large stable companies, which brings a balance between risk and return. An instrument that investors love if they are looking for stability and passive income.

    Money market instruments is another name for bonds as an alternative for bank deposits.

    They are short-term, highly liquid and high quality debt securities with maturities usually less than one year. 

    Money market instruments are known for their stability and low-risk profile, making it attractive to investors seeking safety and preservation of capital, over fixed deposits. It is a suitable parking tool for money that you do not want to take risk on, such as emergency funds.

    High yield bonds sit on the riskier side, offering higher returns. 

    As the name suggests, high yield bonds are usually issued by an entity with a less ideal financial standing which compensates investors with a higher coupon for taking on the risk.

    REITs – Real Estate’s Investment Gem

    Entering the world of Real Estate Investment Trusts (REITs), we find a unique asset class that provides exposure to real estate without the need for direct ownership. 

    REITs focus on owning and managing income producing real estate properties, which offers both passive income and capital appreciation potential to investors primarily from rents collected and price appreciation of the underlying properties owned by the REITs. 

    Investors no longer need millions or commit to hefty mortgage loans to invest in real estate. With REITs, investors can gain access and diversification to a wide range of real estate investment such as residential, retail, office, industrial, healthcare, data centre or even mortgage backed investments to generate passive income and capital growth.

    Stocks/Equities – Riding the Market Waves (high volatility, high returns)

    Now, let’s venture into the realm of stocks/equities. Starting with the least risky of the asset class, we have blue chip, or large-cap stocks. These are shares in large, well-established companies known for their business stability and consistent dividends.

    Moving up in the risk spectrum, there are growth stocks. These belong to companies with potential for substantial expansion, offering capital appreciation but often with increased volatility. Usually associated with sectors like Tech or drugs developing pharmaceutical companies. 

    There are also small-cap stocks, which represent smaller companies with higher growth potential but also heightened risk. These stocks belong to smaller and often newer companies with a relatively small market capitalisation. While they offer the potential for high returns, they come with a considerable risk of volatility. 

    There are also cases where long-standing companies may fall into the small-cap category. This can happen for various reasons –

    Market Conditions

    Economic downturns or industry-specific challenges can impact a company’s stock price and market capitalisation.

    Niche Markets

    Companies operating in niche markets may have smaller overall market capitalisation, even if they’ve been around for a significant period.

    Size of Operations

    Some companies deliberately choose to remain smaller in terms of operations and market capitalisation.

    Investors interested in growth and small-cap stocks for higher returns should conduct thorough research, as these stocks can be volatile and may require a different risk tolerance compared to larger, more established companies. 

    Embracing the Risk-Return Tradeoff 

    In conclusion, shying away from investments due to fear of risk may not be the wisest approach. Each investment class caters to different risk appetites, and understanding their dynamics is the key to successful wealth building. 

    Diversification across various asset classes can help manage risks effectively. 

    Finding Your Comfort Zone

    Ultimately, your investment journey is unique. It’s about aligning your financial goals with investments that match your risk tolerance. As you navigate the markets, each type of asset class reacts to market conditions differently, education and knowledge is your compass, and professional advice can be your guiding star. 

    In the world of investments, risk is inevitable, but so are opportunities. By understanding the landscape, you empower yourself to make choices that resonate with your financial aspirations.”

    Whether you are embarking on the journey on your own or working with an adviser, investing is a must if you want your money to be working for you while you sleep. 

    Here at InvestAble, we believe that there are no single best or worst investments, but it is more about understanding them and using them accordingly to get the ideal investment experience. We hope to educate and work with clients to reach their financial goals by making decisions with research, data and statistics. 

    If we are able to be of assistance, feel free to reach out for a consultation.

    Check out our article – Do I need to work with a financial professional for my own personal investment?

  • Building Wealth in Your 30s, 40s, and Beyond

    Building Wealth in Your 30s, 40s, and Beyond

    Building Wealth in Your 30s, 40s, and Beyond

    The pursuit of financial success is not just a goal—it’s a necessity. In the dynamic world of investments, where every decision can shape your financial future, strategic planning becomes paramount.

    Whether you find yourself in the vibrant years of your 30s, the seasoned expertise of your 40s, or beyond, the journey to building and preserving wealth is both an art and a science.

    Financial Goal Setting: Charting Your Path to Success

    One of the initial steps in building wealth is setting clear and realistic financial goals. As a professional, you likely have various milestones on your horizon, such as homeownership, education expenses, and retirement. Take the time to evaluate your short-term and long-term objectives, considering the timeframes and financial commitments associated with each. This deliberate approach not only provides direction but also allows you to tailor your investment strategy to align with your unique goals.

    Diversification Strategies: Mitigating Risk and Maximising Returns

    Diversification is a cornerstone of successful investing, and it’s particularly relevant for professionals juggling diverse responsibilities. Spread your investments across different asset classes to reduce risk and enhance the potential for returns. While the allure of high-risk, high-reward investments may be tempting, a well-balanced and diversified portfolio is more likely to weather market fluctuations and deliver stable growth over time. Consider a mix of stocks, bonds, and other investment vehicles that align with your risk tolerance and financial objectives. For a more comprehensive article on diversification, please refer to this article. 

    Retirement Planning Realities: Navigating the Future

    Retirement planning takes on a different hue for professionals in their 30s, 40s, and beyond. Beyond the traditional considerations of lifestyle expectations, healthcare costs become a critical factor. Start by envisioning your desired retirement lifestyle and estimating the associated expenses. Factor in potential healthcare needs, and explore investment strategies that ensure your retirement nest egg is robust enough to support your chosen lifestyle. Remember, the earlier you start planning, the more effectively you can navigate the unique challenges posed by retirement in your professional years.

    Navigating Market Volatility: Staying the Course

    Market volatility is an inevitable part of the investment landscape. For professionals with demanding careers, the ability to navigate market ups and downs is essential. Develop a long-term perspective that allows you to weather short-term fluctuations without succumbing to panic. Resist the temptation to make impulsive decisions based on market noise. Instead, focus on the underlying strength of your investment strategy and the resilience of your diversified portfolio. This mindset ensures that you stay on course, even when the financial seas get rough.

    Remember that building wealth is not a sprint but a marathon. The steps you take today, in your 30s, 40s, or beyond, shape the financial landscape of your future. By setting clear goals, diversifying strategically, planning for retirement realistically, and navigating market volatility with resilience, you are not just managing money; you are crafting a legacy.

  • Navigating the Supplementary Retirement Scheme

    Navigating the Supplementary Retirement Scheme

    Navigating the Supplementary Retirement Scheme

    The Supplementary Retirement Scheme (SRS) stands as a beacon, guiding individuals towards a financially secure retirement beyond the realms of the Central Provident Fund (CPF).

    As a voluntary initiative, it beckons to those seeking to bolster their retirement savings. In this article, we’ll delve into the intricacies of SRS, exploring its potential tax advantages, liquidity considerations, and actionable steps for prudent wealth growth.

    Unlocking the Potential Tax Savings

    The essence of SRS lies in its ability to curtail the burden of income tax. Every dollar contributed to your SRS reduces your taxable income of that year of assessment (YA).

    Contribution Limits

    As of the time of writing, Singaporeans and Permanent Residents (PRs) can contribute up to $15,300* annually, while foreigners have a cap of $35,700. To illustrate the potential tax savings, consider this: if you find yourself in the 15% tax bracket, contributing the maximum $15,300 to SRS equates to a substantial $2,295 in tax savings.

    Navigating Liquidity Considerations

    While the allure of tax savings is undeniable, the path to financial prudence necessitates a nuanced understanding of liquidity considerations within the SRS framework.

    Withdrawal Penalties

    Funds within the SRS harbor penalties if withdrawn prematurely before the statutory retirement age. Premature withdrawals not only face a 100% tax imposition but also incur an additional 5% penalty. This underscores the importance of strategic planning, aligning contributions with long-term retirement goals.

    Building Liquidity Safeguards

    Before committing to SRS contributions, it is imperative to assess one’s liquidity needs. Establishing a robust emergency fund should take precedence, ensuring that funds allocated to SRS are intended for the long-term and not earmarked for immediate financial requirements.

    Actionable Steps for Growing SRS Wealth

    Contributing to SRS is not merely a passive financial move; it demands active engagement to harness its full potential.

    Exploring Investment Avenues

    SRS contributions, if left dormant, will only earn 0.05%* per annum. Instead, consider them as seeds waiting to be sown in the fertile soil of investment opportunities. Delve into various investment options, from shares, bonds and unit trusts to endowment policies and fixed deposits. This active approach ensures that your SRS funds do not merely languish but flourish over time.

    Tax-Free Accumulation

    One of the jewels in the SRS crown is its ability to accumulate investment returns tax-free. This feature amplifies the growth potential of your savings, paving the way for a more financially robust retirement.

    The 50% Rule

    Upon retirement, the beauty of SRS truly unfolds. While 50% of withdrawals from SRS are taxable, the remaining half enjoys a tax-free status. This measured taxation allows retirees to enjoy the fruits of their investment endeavors without being unduly burdened by taxes.

    Crafting Sound Investment Strategies

    InvestAble’s Approach

    When it comes to navigating the complex landscape of investment within SRS, a guiding hand can make all the difference. We advocate for a robust and informed approach to SRS investments. Our strategy involves deploying cost-efficient and globally diversified funds, ensuring that our clients’ SRS savings are positioned for long-term growth. 

    Forging a Path to Financial Freedom

    Supplementary Retirement Scheme (SRS) emerges as a key partner, guiding individuals towards a retirement marked by financial freedom. From understanding the nuances of potential tax savings to navigating liquidity considerations and crafting sound investment strategies, each step taken within the realm of SRS contributes to the creation of a secure and prosperous retirement. As the financial landscape evolves, embracing the opportunities presented by SRS is not just a choice; it is a strategic move towards a future defined by financial stability and peace of mind.

    As you contemplate the possibilities it offers, we recognise the importance of personalised guidance in navigating this financial terrain. Your journey to optimal financial health begins with a conversation, and we invite you to take the next step. Whether you have questions about contribution strategies, investment options, or withdrawal planning, InvestAble is here to provide tailored insights. Your financial future deserves the attention it warrants. To embark on this journey together, click here to schedule a meeting.

    *Source: IRAS

  • Diversifying Investment Portfolios for Singaporeans

    Diversifying Investment Portfolios for Singaporeans

    Diversifying Investment Portfolios for Singaporeans

    In the ever-evolving realm of investments, safeguarding and augmenting wealth demand strategic approaches.

    A potent strategy in this pursuit is the meticulous diversification of investment portfolios. This article navigates through three pivotal principles that wield significant influence over the triumph of portfolio diversification for professionals: Global Diversification, Asset Class Allocation, and Systematic Rebalancing.

    Global Diversification: Tapping into Worldwide Potential

    At the core of effective portfolio diversification lies the imperative to extend beyond local markets and embrace global opportunities. High-income professionals stand to gain immensely from diversifying investments across diverse regions and economies. While Singapore’s financial market thrives, acknowledging global dynamics is crucial for well-rounded investment outcomes.

    Integrating international assets into a portfolio unlocks access to varied economic cycles, potentially capitalising on growth in regions where others may falter. This not only broadens the investment horizon but also mitigates risks tied to regional economic downturns or crises. Allocating a segment of the portfolio to established international markets and emerging economies forms a sturdy foundation for enduring wealth growth.

    Asset Class Allocation: Harmonising Risk and Reward

    At the heart of a robust diversification strategy lies the art of asset class allocation. Thoughtful distribution across various asset classes—stocks, bonds, real estate (including REITs)—is pivotal for crafting a balanced and resilient portfolio. Each asset class bears distinct risk and return characteristics; strategic combination enables risk management while pursuing appealing returns.

    Systematic Rebalancing: Synchronizing with Objectives

    In a dynamic financial landscape where market conditions fluctuate swiftly, systematic rebalancing emerges as a cornerstone of portfolio management. This practice involves periodic adjustments to realign the portfolio with its original or target asset allocation.

    In practical terms, if a bullish market leads to an overemphasis on equities, systematic rebalancing entails selling some stocks and reinvesting in underrepresented asset classes like bonds or cash. This disciplined approach ensures the portfolio stays in harmony with the investor’s goals, preventing overexposure to the risks of a specific asset class.

    In essence, effective portfolio diversification for professionals entails a strategic amalgamation of global exposure, deliberate asset class allocation, and disciplined systematic rebalancing. By integrating these principles into their investment approach, high-income individuals not only mitigate risk but also position themselves for enduring financial success. As always, the guidance of a financial adviser can further refine these strategies to align with individual circumstances and objectives.

    In the pursuit of financial goals and a positive investment experience based on data and statistics, InvestAble seeks to educate and collaborate with clients. If you find this article insightful and wish to explore further, click here to set up a meeting.