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Showing posts with the label wealth management

Why REITS deserve a place in your portfolio

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Real Estate Investment Trusts or REITs in short were established as an asset class in the US in the 1960s to provide investors a platform to invest in income producing real estate without directly owning the real estate. The asset class was introduced in Singapore in 2002 with the listing of CapitaLand Mall Trust. Since then, many more REITs were listed both in Singapore and the region and the asset class is widely accepted as a staple for investors looking for income. REITs offer income investors a few benefits to other income producing assets. REITs are generally  granted tax benefits where the distribution is tax exempt if the REIT pays out the bulk of their income, typically 90%, to unitholders. REITs also offer more liquidity to directly buying into real estate, where you can easily liquidate your holdings in the capital markets. In this article, I highlight 3 reasons why REITs deserve a place in your financial portfolio. Photo by Swapnil Bapat on Unsplash     "With the reop

3 things to do in a rising interest rate environment

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It is no secret we are moving into a rising interest rate environment to combat inflation. While it is debatable how much the US Federal Reserve can increase interest rates before causing the economy to slow down, I think interest rates are generally on an uptrend within the next two years.  Interest rates can affect your financial portfolios in a number of ways. In this article, I will share 3 things you should do for your portfolio in view of the rising interest rate environment. Source: https://unsplash.com/photos/__cBlRzLSTg 1. Refinance or reprice your mortgage loan to a fixed rate For most of us, the single biggest impact of interest rate is your housing loan. As interest rates rise, your mortgage interest rate is likely to rise.  If you are on a floating rate and are due for refinancing, you may want to explore refinancing or repricing to a fixed rate package. This will lock in your mortgage interest rate for the next two to three years.  2. Review your budget If you are not eli

How to create passive income to fund essential to luxury expenses

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Passive income is a key path to financial freedom. While active income allows you to trade time for money, passive income allows your money to work for you. When your passive income outgrows your expenses at some point, technically you are financially free. Sounds simple enough? Source: https://unsplash.com/photos/D3_u5E6E2Hg The challenge for most people is they tend to see passive income as a single source of income. For example, some may invest in dividend stocks and the income from the dividends become a source of passive income. Others may decide to invest in real estate and treat the rental income as a source of passive income. The above is fine, but by concentrating your income stream from a single source, you bear the full downside risk of the asset class.  The recent stock market correction is a good reminder, where a substantial correction in the markets can cause investors to panic. I speak to clients on managing their wealth on a daily basis, most tend to overestimate their

5 Instruments to Build Passive Income

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Dividend or income investing has been gaining traction in recent years, particularly with the FIRE (i.e. Financial Independence, Retire Early) movement amongst the younger crowd to build up a passive income stream towards financial freedom. In this article, I highlight some of the main financial instruments you can deploy to build up a passive income stream for yourself. Photo by Jonathan K├Ârner on Unsplash DIVIDEND STOCKS Dividend yielding stocks are a common tool for building passive income. In particular, companies in more stable or defensive industries tend to give out part of their operating profits in the form of dividends to reward shareholders. Dividend stocks tend to be less volatile than growth counters due to the dividend payout providing support for stock prices. As with all stock investing, a good knowledge of stock analysis will give you a better chance of picking out good dividend counters. REAL ESTATE INVESTMENT TRUSTS (REITS) REITs have been gaining popularity in rece

Should I Invest in Stocks?

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Speaking to clients regularly on their investments, one common question I am asked is "should I invest in stocks?". The simple answer to this is "it depends". In this brief article, I hope to outline a few questions you can ask yourself to see if stocks are the right investment vehicle for you. Most people who turn to stocks are generally intrigued by the potential returns and maybe some times envious of friends who seem to earn insane returns from the stock markets. Yes, it's true. It's possible to earn higher potential returns from stock picking. The opposite applies. You can similarly lose a large part of your capital by picking the wrong stocks.  Here are 3 criteria I generally lay out to see if stock picking is for you. Photo by ben o'bro on Unsplash  1. Do you have an interest in stock analysis?  Stock picking generally involves in depth study of the financials of the company to determine if a particular stock is worth buying. Most people who do w

Tax Planning 101

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The saying goes, there is nothing certain in life but death and taxes. Every year, we get a letter thanking us for our contribution to nation building. While I think paying taxes is an important part to the entire fiscal system, proper tax planning allows us to not pay more taxes than what is legally necessary. In this article, I highlight 3 simple things you can do to reduce your tax obligations while achieving other objectives such as retirement planning. Photo by Luca Bravo on Unsplash CONTRIBUTING TO THE SUPPLEMENTARY RETIREMENT SCHEME (SRS) The Supplementary Retirement Scheme (SRS) was launched in 2001 to encourage individuals to save for their retirement, complementing their existing CPF funds. You can open an SRS account with any of the 3 local banks (i.e. DBS, OCBC or UOB). This allows you to contribute a maximum of $15,300 a year to your SRS account for Singapore Citizens and Permanent Residents. Your tax obligation for the year of assessment will be reduced by the correspond

Essential Elements of Wealth Plan

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While many tend to approach wealth management on an adhoc basis (i.e. implementing products off the shelf), I think there are merits to incorporate financial instruments at a more holistic portfolio basis. In this article, I provide an overview of what I believe are essential elements of a comprehensive wealth plan. Insurance or risk management tends to form the foundation of a wealth management plan, however, for the purpose of this article I will not include discussions on insurance and protection planning. Photo by Pietro De Grandi on Unsplash EMERGENCY FUND One key element of your wealth plan are your emergency funds. These are generally liquid assets which you can activate on short notice in the event of emergencies (e.g. unforeseen expenditure, retrenchment, etc). One trend I notice around emergency funds is that most people either have too little or too much emergency funds. I recommend around 3 to 6 months of income to be kept liquid as emergency funds. The risk of having too

Top 5 CPF Hacks For You

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The Central Provident Fund (CPF) is a government scheme initiated to help members prepare for their retirement. Over the years, many initiatives have been introduced to enable people greater flexibility in deciding how funds in their CPF accounts are used. There are 3 accounts in the CPF, namely the Ordinary, Special and Medisave accounts. In this article, I put together the top 5 hacks you can do to ensure your CPF is well utilised. Photo by Rowan Heuvel on Unsplash 1. TOPPING UP THE SPECIAL ACCOUNT Starting with the Special account, the Special account currently earns you interests of 4% per annum. This is a decent return for something relatively lower risk. You can do a voluntary cash top-up of your Special account up to $14,000 per annum (maximum $7,000 for self and $7,000 for family members). Not only does this ensure you have more funds in your CPF during retirement, the cash top up qualifies you for tax reliefs when you do a voluntary contribution to your Special account up to

4-3-2-1 Approach to Financial Freedom

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I speak to clients on a daily basis regarding management of their wealth. One common trend I observe is many people aspire to reach financial freedom at some point in their lives, but most are clueless how to get there. Financial freedom is the point in your life when your work becomes an option rather than a means of survival. In this article, I outline some broad strategies on how you can get started along this journey towards financial freedom. The 4-3-2-1 Approach Photo by Jason Hogan on Unsplash One simple rule of thumb I tend to adopt is going by the 4-3-2-1 ratios to budgeting. This ratio allocates 40% of your income towards expenses, 30% towards housing, 20% towards savings and investments and 10% towards insurance. While this is by no means a hard fixed rule, it is a useful guide to ensure you are not over-allocating resources towards any one single area while neglecting the rest. For a young person who has yet to acquire the first property, the 30% for housing