Compared to PAIN, CONFUSION is even a more serious problem, because it directly impacts the actions I take.
CONFUSION 1: How to get past the past?
I realize three reasons why I cannot get past the past:
It is hard to ignore the heavy losses — I would have hit my retirement numbers if not for these mistakes
I do not want to take easy on myself — I would like to retain these as painful reminders so that I learn
I have not got rid of my legacy portfolio — Honestly, I am not sure what to do with them.
Part of me wants to clear them and start over. These are individual stocks that I do not know and I do not have interest in researching them either. Also, they are not generating returns.
On the other hand, if I clear them, paper loss will turn into actual loss. And even though they are not generating returns, they are not tanking much further either. I have lost 98% of the value for some stocks. How much further down can they go?
Also, I do not know if I clear them and invest the money elsewhere, the return would be better. Actually, I am secretly hoping that some of these will bounce back, hopefully faster than the world index. But I understand hoping is not a strategy.
Closing my eyes and following my gut, I guess I am a little inclined to clearing them and investing the money in World index. After all, I can hold world index for 20 years. I do not know how many of those individual stocks I currently have will still exist in 20 years.
But it is much harder to pull the plug than logically expected.
If you are reading this article and have advice for me, I would be grateful.
CONFUSION 2: What is the right way to build wealth?
I am struggling to keep up with my yearly target on Total Net-Worth growth, which I set a few years back before Covid. And that was a very conservative target.
Our expenses largely stayed within our estimates. So the problem is the income.
Our salary income has grown faster than planned, partly due to inflation. But the investment losses are really holding us back.
As you can see from my monthly updates, investment losses just erased our monthly salary for some months.
Needless to say, I am still very far away from my 40/40 goal.
So I am not exactly doing well here.
And I am not sure what the right way is. Investment outcome is just so out of our control. I can see no path to wealth with enough certainty.
I thought of taking investment courses, but I do not want to spend the efforts and I do not really trust them — part of the reason we are in this deep loss was due to my wife taking some of these courses and following some of those “experts”.
The three things I can figure out for now that might work is:
Work hard for promotions and pay raises — Still out of my control, but less so than investments I would say
Cut expenses — This does not make me feel good. We are always frugal people. Sometimes, I do feel that my family and I deserve better. What’s worse, the expenses saved is nothing compared to investment losses
DCA into World index — Outcome is out of control, but activity is controllable. This time, I will stick to it — I do not have any better ideas anyway.
Lower Cost of Living: In many countries, the cost of living is significantly lower than in Singapore. This means that retirees can stretch their savings further and enjoy a higher standard of living than they would in the Singapore. For example, Malaysia requires a quarter of the amount to retire comfortably, compared to Singapore.
Better Weather: For many retirees, the weather is a major factor in their decision to retire abroad, e.g., 4 seasons or all-year spring type of weather.
New Experiences: Retiring abroad can be a chance to experience a new culture, learn a new language, and meet new people. This can be a rewarding experience that can broaden your horizons and provide a sense of adventure.
Despite the many advantages of retiring abroad, there are also some potential downsides:
Culture Shock: Moving to a new country can be a significant culture shock, especially if you don’t speak the language or are not familiar with the customs. This can be a difficult adjustment for some retirees.
Social Isolation: Moving to a new country can also be a lonely experience, especially if you don’t have friends or family nearby. It can be challenging to make new friends and establish a social network in a new place.
Legal Issues: Retiring abroad can also come with legal and financial issues. For example, you may need to navigate a new tax system or deal with unfamiliar legal procedures.
Health Care: While health care may be more affordable in some countries, the quality of care may not be up to par with what you’re used to in Singapore. This can be a significant concern for retirees who may need more medical care as they age.
Safety: Not easy to find a safer place than Singapore.
In conclusion, retiring abroad can be a rewarding experience, but it’s important to weigh the pros and cons carefully before making the decision to move. It’s also a good idea to consult with a financial advisor, tax specialist, and attorney to ensure that you understand the legal and financial implications of retiring abroad.
With careful planning and consideration, retiring abroad can be a dream come true for many retirees.
I never expected this post to be so long. And it took at least 5 times the time I originally planned. Checking the facts and recalling the thinking then was the time-consuming part.
But it was worth it. I took this opportunity to have a careful review of the whole journey and hopefully I could offer something of value to you as well.
And I found out that certain things were just hidden away from my sight, but they were never lost.
Three things to take note:
1. I did a more throughout assessment and found out that the “lost” returns was actually over 300K, instead of the 200K I derived from the ball park estimate
2. Certain things can be hidden or buried. But they will just jump out at the right occasion and they cannot be ignored. I realize some of the content is not very much related to the topic. They should be easy to spot. Feel free to skip them.
3. I had to stop half way last week due to lack of time and decided to split the post into two or even three. I am able to complete it now and have made some revisions to the first part too. So I have posted the completed version here for easy read.
I really hope this read can provide you with some take-away. That would exceed my expectations I have for this post!
After reading a few books, discussion forums and discussing with the friends in the industry, I gathered a few investment strategies.
After evaluating my interest, estimating the time I can invest in the area and recalling my inability to balance a balance sheet in university, I decided to take up a simple and proven one:
Use CPF as bond component
Invest all my other investable asset in stocks with 90–10 split into world index and SG index
Adopt the DCA method with monthly capital injection
Seeing the deviation from the strategy, with an empty war chest and SG index continuing to drop, I struggled between continuing to invest in SG index and switching to invest in world index, with my only cash flow — what’s left over from my salary after expenses.
I was lucky to take a rational look at that time.
The event that Creative decided to go public in HK made me realize that SG market was small and lacked the upside potential.
So I switched to world index.
That was when my return started to recover.
I thought of selling the SG index to restore my portfolio split, but I was a firm “buy and hold” believer at that time and the fee with the banks was high (there were less choices for brokers then).
For the next one year or so, I stayed the course to invest in world index on a monthly basis.
And the amount was quite consistent since my salary and family expenses were quite consistent.
So I was actually DCA-ing. This is probably the only period I really practiced DCA.
Before I deviated again from the strategy, my portfolio split between World and SG Index was only close to 50–50, still far away from the split set by the strategy.
The returns were good.
During the same period, I also took my money in China out of P2P lending and started to invest in China index.
I went from a situation where I had 2 well-paid offers to pick from to a totally different one where I was jobless. It happened two weeks before my onboarding to the new job so it was not even possible for me to keep my current job. The financial loss was much heavier than what was discussed here.
I was suddenly in a totally different state, where things I needed to worry about changed almost entirely.
Before the incident, I was worried about how to get more returns through investment and retirement planning.
After the incident, I had to worry about how to make sure we had enough to cover our expenses and how to regain that cash flow without taking a job I hate or a significant pay cut.
What worried us most was the uncertainty. I did not know when I could get another job and restore the stable cash flow and the prospects.
At that time, I felt lucky that my war chest was full.
The deep and narrow “V” surprised almost everyone.
Even some of the investment guru in big investment institutions were asking their client to sell and not to buy, I later found out.
Very few expected the market to recover so quickly.
However, COVID situation continued to worsen.
China closed borders which meant I could not onboard my new job.
I will continue to freelance. I still expected to get paid then, but knew that the pay would come much later.
So we again had to evaluate our situation.
This time around, we knew we were dealing with something much worse than what we expected. Instead of 2–3 months of no income, we could be dealing with a year or even longer.
So when the market recovered and was about 5% higher than the previous high, I decided to clear my positions in World Index and China Index, to pocket the gains.
I was really scared of a “Double Dip”.
It was not about returns any more. It was about more basic needs for my family.
I was very very busy with work leading a very challenging team on a very challenging engagement for a very challenging client, suffering from back pain due to sitting long hours under high pressure. So I had no time to look at the markets.
At the same time, I was very very pessimistic and even frightened.
You might be wondering why I cleared my positions for World Index and China Index, instead of the SG Index.
That way, I could have harnessed the 30% gain for World Index and China Index in 2020, and avoided the stagnant SG Index.
There were a few reasons:
The most important one was probably the fact that I was still losing money in SG Index at that time. This cognitive bias made me try to avoid realizing the loss.
I did not believe the SG Index could experience any significant further drop and therefore the risk of “Double Dip” was low
SG Index paid out (still do now) dividend in SGD, so it would directly help our cashflow, which was of ultimate importance.
This deviation made me lose the opportunity of another 30% gain on basically all my capital invested in World Index and China Index, which is substantial.
After I stepped away by clearing my positions in World Index and China Index, my situation continued.
I continued to freelance with the expectation for the pay diminishing along the way.
And I rejected the opportunity to re-join my previous company in Jul.
So my situation continued and all the concerns were still present.
So I kept away.
I did not make any capital injection into the market.
I was holding quite a bit of cash just in case.
Looking back now, that was too much emergency funds, enough to cover our expenses for at least 3–4 years.
I guess I was still frightened by the possibility that I would not be able to provide for my family.
My family should not suffer because of my mistakes or inability.
Also, I was quite worried about our new flat.
My wife’s salary would not get us enough loans.
So the possibility of us losing the flat and all the down payment and expenses was real.
The situation was bad.
And one thing became clear when I thought back: my approach was contradicting!
On one hand, I was really conservative with money we already had to prepare for “rainy days” — I almost laughed when I wrote this down. We were already in the “rain”.
On the other hand, I rejected the opportunity to draw a stable salary on a stable job, which was more than enough to make all my worries above go way.
I stubbornly believed that the China opportunity provided more potential. And there was “trust” and “cannot let them down” with my mentor involved.
However, deep down, I guess I was still angry and I refused to let the incident define my life in any way.
So the fact that I did what I did in those situation without realizing it was a sign that I valued my pride and career potential over more money after being able to provide enough for my family.
Under all these pressure, especially the risk of losing our flat, when the VP of my previous company reached out again, I finally “gave in”.
I thought I “gave in” to short term gain at the cost of long term gain, because we were always talking about how much the increment would be.
It turned out to be 15% pay reduction. And the process took so much longer than what the VP promised.
And I had to reach out to the HR to get any update.
I felt humiliated.
I thought of just walking away and leaving all these behind.
My wife was always supportive. So she had no problem if I just walked away.
But I was out of options then.
I told my mentor my intention to accept the offer even before I said “Yes” to the VP. Even I could go back to the old offer, it would not help our cash flow any time soon.
And finding another job soon would be hard.
So I took it.
Among all the bad feelings, I also felt relieved when I signed the offer.
I knew I would get some room to breath and re-collect myself. I could not do this while in the state of scarcity I had been for the past 1 year.
This was what I got for “being a coward”.
I knew I had to live with my choice and the constant and painful reminders that came with it.
To do that, I knew I had to make peace with myself and with the situations.
I think I managed it by ignoring the reminders as much as possible and distracting myself on other things.
So we all can get pretty good at self-deceiving when it comes to that.
We got our new flat without any problem. And after a few months of stable income and re-establishing some routines, I was ready to come back.
When we reviewed our financial situation, I was shocked by the returns my wife managed by investing the small amount of capital we had in spare, mainly the onshore RMB we saved from wedding gifts and my salary when I was working in China.
She mentioned to me a few times and I had the impression that she was getting good returns.
However, returns that good still surprised me.
And the logic seemed simple.
So I decided to re-enter the market with the new strategy.
At first, we were lucky. The returns quickly overwhelmed me.
So after we have emptied our war chest, I decided to finally let go of our SG Index, which was still in the red after a few years.
Shortly after, the “profiting taking” happened and my portfolio slipped into the Red, while SG Index had a pretty good run after the Chinese New Year.
So my portfolio has been in the red since then.
From time to time, I wish I had pocketed the gains of over 60K. But for the most part, I was not affected and I did not reduce any positions.
The most effective strategy is usually simple. Staying to it is the hard part.
From my experience, it definitely holds for investing. In the course of 3 years, the simple strategy could have earned me 300K SGD if I had stuck to it.
One big enemy is free time that we do not know how to spend.
Maybe the unintended benefits of staying busy with work or life is that we are forced to stick to the simple strategy.
