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Fear Of Investing

>> Saturday, December 8, 2012

It had been a crazy few months. Having met quite a number of people in their fifties, most were on the topic of planning for retirement. A typical sentiment shared by most of them immediate at the onset of the conversation is "I am old already, going to retire, I cannot take any risk with investments". This is a disturbing trend and it is difficult to change mindsets. This reminds me of the time I met a "Poor Dad" and a "Rich Dad".

First, the "Poor Dad". He was a humble civil servant who being highly educated, worked his whole life for the government. He slowly rise through the ranks. By the time of retirement, he had reach a respectable level and even had a pension pay out. He was frugal and amassed a fair sum for a comfortable retirement. This was 15 years ago.

Fast forward to the present, he is in his late sixties and complaining that he is afraid to live too long as he has nearly a good twenty years based on average life expectancy and may not have much to leave for his children. What happened? Well, he simply shared the same fear of investing and placed all his savings into fixed deposits that had eroded tremendously due to inflation. Even his pension is barely able to sustain a reasonable standard of living that he is used to as it was based on 1990s salary levels.

Next, the "Rich Dad". He was a bus driver. He drove primary school children to and from school as well as factory workers. Although not having finished proper education, he was keen on learning simple investments. So, after paying up his HDB at about age 30 plus, he insisted to place a small percentage of his savings into shares. He did not understand which company to choose, neither were there complicated analyst reports to follow. He used what he knew, simply follow government supported companies that have a monopoly in Singapore market at that point in time.

He bought paper shares into SPH, Singtel, SIA, basically according to him jokingly, Companies that have Singapore in their names. Needless to say, inclusive of the dividends, the funds have increased about five times. And the next thing he did before his retirement was to sell off a portion of it and used it to purchase a private property in the most unheard off place at that point in time, Buangkok. Today, the property has more than doubled in value and he is living happily off the rental income and dividend income from all his investments. At the same age of sixties, he does not fear the next twenty years as much as "Poor Dad".

Is it sheer luck? We can only see from hind sight. But a prevalent point I got from this is that retirement is a good 30 years. That in my opinion is not short term. So even when it comes to retirement, do not place all the bets into a fixed deposit. Asset allocation is still crucial if not more important now more than ever.

Cheers to all! An advance Merry Christmas and a Happy New Year!

10 comments:

CreateWealth8888 December 8, 2012 at 8:32 AM  

Real People, Real Story?

Lau December 8, 2012 at 11:03 AM  

Up early on a Sat morning. :)

Real people, story is as real as they share with me. :)

Singapore Man Of Leisure December 8, 2012 at 11:56 AM  

Mr Lau,

Inspiring post. No one looks out for our own future better than ourselves.

Some may say it's pure dumb luck.

Can't deny it.

But for luck to fall on us, we need to stand in the open. It's a lot harder for luck to find us if we always cower under the blanket ;)


CreateWealth8888 December 8, 2012 at 1:22 PM  

Value Investing made simple by investing in "Singapore XXX" stocks.

LOL!

Lau December 9, 2012 at 8:10 PM  

SMOL, that is like the joke of praying to strike the lottery but never buying a lottery ticket.

CW8888, talk about KISS, keeping it simple.

temperament December 10, 2012 at 5:07 PM  

Yes! Investing during one's de-accumulating phase is still a must. Who but GOD knows how long you are going to live?
i found investing now is bit more "tricky". Assets Allocation suddenly is very important now. When i first started i believe in almost 100% stocks. Actually i still do only i can't afford now.

Wealth management consultation December 11, 2012 at 2:17 AM  

nice share.. thanks!!

Lau December 11, 2012 at 7:48 AM  

Temperament, important but many suffer from conventional advice to preserve and assume they are 100% risk adverse.

Wmc, cheers. Hope to carry on sharing.

financialray December 18, 2012 at 3:11 PM  

personally I have also come across 2 people who have caught the property cycle at the right time. Feel happy for them that they are landlords collecting passive income for retirement. There are also 2 who went on to publish books on how they manage to end up trading up and now living in landed properties that have appreciated. Of course, there are also others who have done well through investing in stocks and REITs. Gut feel though is that there are many more who prosper from property investments.

Lau December 18, 2012 at 9:57 PM  

Hi FR, I would agree with your gut feel that more are through property investments. However, in my opinion, that is in the past, on hindsight right now. Moving forward, it will be more difficult to generate in percentage terms the same appreciation seen previously when Sg was only just developing. We should see less prospering from property investments relatively.

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