Brexit: What Should I Do with My Portfolio?

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Since the UK voted to leave the European Union on 23 June, global markets and currencies have reacted negatively to the uncertainty, with a significant falls across all major equity markets. The British pound fell to a three-decade low against the US dollar – its biggest one-day fall on record. Markets are likely to remain volatile until it becomes clear what Brexit will mean for the UK and the rest of the EU.

What does all this mean for your portfolio? Clearly, no one knows for sure. But no matter how markets react in the next few months, you should follow this advice: Don’t let fear of the unknown – or your emotions  make your investing decisions for you.

Why we let emotions drive our investments. We tend to be controlled by our emotions regardless of circumstances. We become overly excited and ready to invest at the worst possible times. And when it comes to deciding how to invest, we often rely on poor advice, a hunch or worse – speculation we heard on the news or the radio. On the other hand, we sometimes let our fears and emotions keep us out of the game altogether.

How to take the emotion out of your investment strategy. Whether you’re worried about how global events might affect your portfolio or just fearful in general, the best investment strategy is one built for the long term. In other words, once you map out a lifelong investing strategy with your financial advisor, you should have confidence in that strategy regardless of the blips you’ll endure along the way.

While it can be fun to “play” the markets, investors should refrain from playing or risking too much on a handful of bets. It is much more prudent to keep your investments boring by broadly diversifying across big and small companies, domestic and foreign companies, and between stocks and bonds.

If your portfolio is properly diversified, stay cool and await developments.

At the end of the day, investing is a game of consistency – one where the investors who take the longest approach usually win. And when it comes to emotional investing – whether out of fear or confidence – the only way to win is not to play.

3 Obvious Ways to Build Wealth

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You don’t have to be a rocket scientist to build wealth. The wealthy understand that while being smart can certainly help you earn money, that doesn’t necessarily mean you’ll build wealth with your earnings.

Likewise, being famous doesn’t necessarily mean you’ll be able to build wealth. Sure, it can help, but there are countless stories of those who earn a ton of money only to watch it disappear seemingly overnight.

So, what are the secrets to building wealth? And, once you build wealth, how do you keep it? The truth is that the “secrets” to building wealth really aren’t secrets at all.

They are simply common sense behaviors that, when practiced with purpose and over a long period of time, are likely to result in a pool full of cash. Let’s take a look at some of these behaviors.

1. Say “no” to debt.

Saying “no” to debt is truly a behavior at the heart of so many wealthy individuals. Why? It has something to do with interest rates.

Student loans, credit cards, personal loans, car loans, and many other types of debt all have interest rates. Some of these rates are higher than others, but one thing is guaranteed: you will pay a lot more money than necessary if you make minimum payments on a loan, and the interest rates will slowly drain any wealth you do have.

Unfortunately, that’s where many people get stuck. They are so used to debt, they think it’s normal and shrug it off as a way of life. Sure, it might be a way of life for some people, but it doesn’t have to be a way of life for you.

The way to get out of debt is to focus your energy on saying “no” to more debt. Make money fast, you might choose to attack your debt even faster than you might initially think possible.

2. Practice discipline and invest for the long-term.

It can be all too easy to get caught up in the hype of this stock or that stock. The media continually reports this or that “new hot stock.” Don’t fall for the trap. It is always better to diversify your investments and not get carried away by the allure of quick wealth.

The number one behavior that inevitably leads to more wealth is staying disciplined. Emotions are very real and very dangerous, and it’s hard to be objective about your money, especially when people around us are talking about doom and gloom as it relates to the economy. Most of your money is invested for the long-term – do not make short-term decisions about your long-term money.

The best way to get market-like returns is not to meddle with your investment mix. If you do, the probability of achieving your financial goals will most likely go down. Predicting where the stock market is headed and making decisions off the prediction is a fool’s game. It requires a crystal ball – and no one has a crystal ball. Stay disciplined.

3. Stay frugal.

It’s human nature for any increase in income to be immediately swallowed by lifestyle improvements, a phenomenon known as ‘lifestyle creep’. Avoid lifestyle creep and build guaranteed increases into your savings plan by changing the way you think about annual raises. The next time you are presented with a raise, challenge yourself to save half of the increase, and ‘creep’ with the other half. This strategy will allow you to pay yourself first, enjoy the fruits of your labor, and build wealth over time.

It’s better to stay frugal, build wealth, and have a firm financial position rather than squander your money on things that you really don’t need – especially over the long-term.

Money Advice that Don’t Grow Old

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Many recommendations I’ve made are as applicable today as they will be in future, and they bear repeating. Here are some of the best financial moves for you to consider:

1. Understanding and managing your thoughts, feelings, and beliefs about money is as important as understanding how money works. Our brains are programmed to make poor financial decisions. Exploring your money history and learning to identify your unconscious beliefs about money can change your financial behaviours forever. It is important to gain control of your finances and become comfortable using money as the valuable tool it is.

2. Building an emergency reserve to cover living expenses for three to months if you lose your job or experience a business slump is a necessity. If you are retired, having one to three years of cash available to cover living expenses can help you avoid taking money out of investments when their value has declined.

3. Retirement will happen, sooner than you think. Start early — as in the day after university graduation — and be consistent in investing at least 20 percent of your paycheck.

4. Learn to appreciate the word “budget”. Creating a way to track and manage income and expenses is an essential skill to thrive financially. Numerous free or inexpensive tools, like Mint.com and Expensify, can help.

5. Run from consumer debt. Personally, I use credit cards for almost every purchase for convenience and cash back rewards. However, it’s of vital importance to pay the card off every month, without fail.

6. A house is a home, not an investment. Don’t buy more home than you can afford, and don’t buy without a down payment.

7. No asset goes up forever. Price declines, even crashes, are part and parcel of investing. It’s essential to understand that the value of your portfolio will fluctuate. Be prepared to ride out downturns. Selling in a down market is a big mistake that will cost you dearly.

8. The fundamental strategy for managing market ups and downs is asset class diversification. This doesn’t mean having money in different banks, with different brokers, or with different fund managers. It’s about having a good balance of mutual/exchange-traded funds that invest in SG and International stocks, SG and International government bonds, real estate investment trusts, commodities and junk bonds.

9. There are no free investments. Pay attention to the fees associated with any investment, as well as how the advisor recommending any investment is compensated.

10. Pay yourself first. The most successful savers and investors I know simply take all their fixed expenses, taxes, and retirement plan contributions off their income earned, then spend the rest. This means learning to live on 30% to 50% of how much you earn. Certainly, it isn’t easy, but one of the most valuable money habits to cultivate is to save something for the future, instead of spending everything that comes in.

You may have likely heard of these pieces of advice before. There’s a reason for that: it works, and never goes out of style.

A Quick Guide To Retirement Planning

Many people work their entire lives with one goal in mind – retirement. It’s one of the most important life events that is experienced by most people.

From a personal and financial perspective, achieving an easy, well-funded retirement is a lifelong process that requires early planning and commitment to a long-term goal. Once you reach retirement age, you can then enjoy the benefits of a comfortable retirement in which you have more than enough money to cover your living costs.

Managing Your Retirement

When it comes to retirement planning, the earlier you can start in your career, the better off you will be.

The problem, however, is that most young people are not thinking about retirement. After all, when you are in your 20s or 30s, being 65 or older can seem like forever.

Even for older people, it can be daunting. While everybody would like to retire in comfort and financial security, the amount of time and complexity of creating a successful retirement plan can make the whole process somewhat intimidating.

As a matter of fact, retirement planning often can be done very easily. All it takes is a little homework, an obtainable savings and investment plan, and the long-term commitment to preparing for your retirement years.

How Much Do You Need for Retirement?

After you stop working, your expenses don’t stop. In fact, given the fact that you probably will be dealing with more health issues, they are likely to be higher.

So how much money do you actually need to fully fund a comfortable retirement? While an exact answer is impossible to give, there are some factors that should be considered:

Medical Expenses – If and when you become ill, you are going to want the top-quality medical services that are available. Most people don’t want to have to depend on charity or welfare. In Singapore, everyone is entitled to MediShield Life benefits. But this publicly funded program only covers minimal expenses. And there often is a gap between what the government will pay for and what you actually need.

Living Expenses – You are still going to have to live indoors, wear clothes, eat food, and have heat and fresh air to breathe when you are retired. All of these things cost money. Even if your mortgage is paid off by the time you retire, you are still going to have to pay property taxes, homeowners insurance, and maintenance costs.

Other Expenses – A comfortable retirement includes such non-essential expenses as entertainment, transportation costs, and other expenses that don’t fall into the other categories.

Add these all up, add the rate of inflation between now and your retirement date, and you have a general idea of how much money you are going to need for your retirement. Now all you have to is multiply that number by how long you expect to live!

Start Planning Now

Retirement planning is a process that takes decades of commitment in order to achieve the end result: The comfortable retirement you deserve. The concept of saving and investing money in a retirement fund may seem daunting, but with a few basic calculations and commitment to a realistic plan, you can achieve it.