Monday, December 20, 2021

[iFast TV] Unconventional Financial Tips You Don't Hear About Everyday


The second part of my video under My Two Cents is out, you can follow this link to access it :

I let the video speak for itself. I'm particularly proud of Kopi Tilok arbitrage.

As we had to brainstorm more unconventional ideas compared to how much we actually deploy, not all of my ideas made the cut, so I will list out the rejected ideas on this blog :

a) Don't believe in asset decumulation

In financial planning circles, a lot of care is taken to consider decumulation which is the process an older person begins to spend down his asset class before he dies. To dividends investors with a portfolio of decent size above $3M who also have children, this is totally optional.

It is entirely possible to limit spending to investment income and pass along capital to your children after you pass away. Wealthy people do not believe in decumulation anyway as spending all that capital may even inflict harm on your well-being.

How many bowls of sharks fin can a person eat anyway?

This idea was not included in the video probably because most viewers are unaware of what decumulation even is.

b) Don't believe in consumption smoothing

Another idea in financial planning circles is that ideally, a person should smoothen his consumption over time. This means being liable for some debt to increase their spending when they are younger and have lower pay and to be able to save more when they receive a higher salary when they are older.

This is always puzzling to me as the key is to be able to save more and work harder when younger to generate compound interest and then build up your savings to live on investments as early as they can. It is not understood why consumption is so important in life as we’re likely trying to buy something to impress someone we don’t even like.

This idea was not included in the video probably because most viewers are unaware of what consumption smoothing is. In advanced societies where fee advice is the norm, consumers are taught this term from financial advisors.

In Singapore, commissioned FAs are too busy taking Instagram photos with their European cars and selling ILPs.

1 comment:

  1. This must be seen with a US context.

    In the US, for the typical worker, saving just 10% of take home pay is almost impossible. It's just the mentality & culture there. With a low proportion of saving & investing, hitting $1M after 35 years of work is already a stretch target.

    Even accounting for DPS growth, the average US stock is still relatively low-yielding. So if the retirement pot is just $1M, there's high probability of having to draw down capital to fund retirement.

    Ditto culture for consumption smoothing.

    I mean in the US, over 20% of 65+ are still paying a mortgage. And a larger % are still renting and not owning a home. It's perfectly ok for them as long as they're happy with their lifestyle, and the total of their 401Ks, IRAs, cash investments, and Social Security are enough to service it.

    In East Asian context where saving 20% of take home pay is considered the minimum, aiming for perpetual dividend or rental machine is more mainstream.