The 7 Deadly Sins of Investing

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There are a few investing errors that many people make — mistakes that are detrimental to their overall investment strategies. Here are the Deadly Sins of Investing that you should avoid…

  1. Not taking your goals into account

Make sure that the investments in your account and their risk levels reflect what you are trying to accomplish. If retirement is 20 years away, and you have your money sitting in cash or bonds, you may not reach your goals. Conversely, if you plan to buy a house in six months, and you have that money invested in the stock market, you might lose your money and not be able to recover the loss in time to buy a home.

  1. Basing your investment strategy on someone else’s risk tolerance

You wouldn’t buy shoes based on someone else’s shoe size, would you? So why would you copy your friend’s portfolio holdings without taking into account your own goals and risk tolerance?

  1. Making too many short-term moves with your long-term money

While buying and selling stock can be fun, it should be done with money that is not intended for your long-term goals. If you are really set on short-term buying and selling, open an account that is just for “play money” and leave the rest of your “serious money” in well diversified, long-term investments.

  1. Having too much money in one investment

If your income depends on your salary from a company, make sure your investments don’t also depend too heavily on the same company. A good rule of thumb is to have no more than 20% of your investments in any one company’s stock — and ideally closer to 10% or less.

  1. Not knowing what you’re actually invested in

You don’t need to know the exact stocks in the index or mutual fund that you have, but you should have a general idea of what is in your portfolio. If you use a financial advisor to manage assets, and you have no idea what they’re doing with your money, ask him or her to break it down for you in simple terms or, graphs and charts.

  1. Basing investment decisions on the news

You can’t predict what’s going to happen in the market based on what you read in the news. It can’t tell you that the stock market is really going to tank tomorrow, and that you should sell everything and go to cash. Research shows that having a well-diversified portfolio that you leave alone is a better strategy than trying to time the market.

  1. Not saving enough

This is crucial. If you aren’t saving enough, it is going to be really hard to get to where you need to be.

For example, say you make $60,000 a year. If you save 10%, or $500 a month, for the next 30 years, with an average 9% return, you’d have around $900,000 to work with come retirement. If you saved 15% and made the same return for the same time period, you’d end up with around $1.34 million. That’s a big difference!

So make a plan to bump up your savings. You don’t have to go from saving 5% of your income to 15% instantly. You can set up automatic increases of 1% every 6 months until you get there.

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4 Life Insurance Myths Debunked

Life-Insurance

Do you have a contingency plan that can protect your family just in case something bad happens to you? Assuming you are the main income earner in your family, it will be difficult for your loved ones to pay for school, food and other amenities in the event you pass away. Let’s be honest, it’s a rather scary thought. If you don’t have life insurance ready, you could be leaving your family in serious financial distress. Having life insurance can help support your loved ones.

However, if you’re not familiar with life insurance policies, it can be difficult to distinguish what is true about life insurance and what is a myth. To help clear up confusion, here are some common myths about life insurance.

Life insurance is too expensive

To the uninformed, life insurance can seem costly, but this is one myth that can be debunked. The cost of a life insurance policy varies, as it depends on several factors such as your entry age and medical history. Life insurance costs less than what most people think. Depending on your situation, you can tailor your insurance and lessen your costs drastically. Keep in mind that insurance is cheaper when you’re young, as you get older, premium prices become higher.

If your employer provides coverage, it’s enough

While many companies do provide employees with life and health insurance, this benefit only lasts as long as you are still employed under that company. While you’ll be covered, this coverage is only temporary and the benefit that is put into your insurance policy isn’t much. Furthermore, the policyholder in this case is your employer which means they reserve the right to amend the terms of coverage with their chosen insurer. This leaves you with uncertain coverage.

It’s advisable to separately apply for your personal life insurance plan to ensure that your family will be able to receive additional funding long after you are no longer able to provide for them. Additionally, you’ll have peace of mind knowing that your loved ones have a reliable means of obtaining funds in the future.

Life insurance is only for those who have children

If you’re not married and don’t have any children, it’s still important to seriously consider getting life insurance. Keep in mind that you still have dependents—your parents or siblings, for example, could from life insurance, as it can still cover other costs such as funeral expenses, unpaid bills and debts. If you were to unexpectedly pass away without a life insurance plan, your loved ones will be left to pay for these costs. So, even if you’re single, do consider obtaining life insurance as early as possible.

My health condition can exclude me from getting life insurance

Even if you have health conditions you can still have life insurance, although you may need to purchase a policy with lower coverage limits. Essentially, life insurance isn’t restricted to people of a certain age, health or even salary. You can always adjust your policy based on all these factors. There are plenty of insurance options that can suit your needs and budget.

These are just some of the many myths about life insurance which can make it difficult for people to fully understand and appreciate it. This often leads to confusion for some people on whether they need insurance or not. While the idea of having life insurance seems intimidating, doing so will bring plenty of benefits for your loved ones.

5 Smart Money Moves for Newlyweds

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Wedding season is officially under way, and odds are, couples en route to the altar have been fiscally focused almost entirely on the Big Day for quite some time.

But once you’ve said your I dos, financially (not romantically), the honeymoon’s over. It’s time to shift some of that energy from planning your marriage to successfully living as a legally wed duo, and that includes figuring out how you’ll handle your money. After all, marriage is an economic partnership too, and disagreements over money are the top source of conflict among couples.

To increase your odds of attaining (and sustaining) marital bliss, implement these five pieces of financial wisdom.

1. Draft Your Marital Money Rules.

Financial goals and household budgets are very important, but equally so are your marital money rules. Think of this as a contract between you and your spouse regarding how you will work together financially. Determine how you’ll handle the bill-paying and whether or not you’ll keep separate checking and savings accounts. Also, establish guidelines for how much money you can spend without having to “preauthorize,” or check in, with your significant other.

2. Live on One Salary, Bank the Other.

Perhaps you’re both working now, but that may not always be the case. If you decide to have children, go back to school, or start your own business someday, that might involve one of you scaling back or getting out of the workforce altogether. Set yourselves up for those possibilities by living on one salary and saving the other. You’ll have more options if you have enough savings to replace one of your salaries for an extended period without having to dramatically alter your lifestyle.

3. Get Rid of Debts.

Starting a marriage with no debt is ideal, but typically unrealistic. Many couples begin marriages with student loans or credit card liabilities. Devise a plan for reducing your debts. Start by transferring balances from high interest credit cards to one with a lower rate. If you’re not able to transfer your balance, pay off either the card with the highest balance or the highest interest rate first, while paying the minimum on all other cards. Cut expenses to pay down your balances as quickly as possible.

4. Review Your Retirement Plan.

A financial need that’s decades away might seem really abstract right now, but no one else will provide for your retirement except you. And the long-term impact of opening a retirement account now is huge, with compound interest accumulating over decades until you retire. Sock away as much as you can in your retirement plan at work. If you can eke out even more money from your budget, contribute to individual retirement accounts like the Supplementary Retirement Scheme (SRS) provided by the CPF Board.

5. Review Your Insurance.

As newlyweds, you need protection against catastrophic medical expenses and a long-term disability. Your employer likely offers disability insurance coverage up to a certain amount as part of a group plan. But make sure it’s enough to fund your and your spouse’s needs in the event you can’t work for a while. Increment of life insurance can generally be delayed until you have children, at which time you might supplement your coverage with either a term or whole life policy.

Put Marital (and Financial) Happiness at the Top of Your “Honey-Do” List

Just like your romantic partnership, your financial partnership is something you craft together as a couple. Take it seriously, and establish your guidelines early, even when it involves topics you might prefer to dodge. By doing so, you’ll limit future arguments, and your marriage will be better off for it.