Me & My Money Series (Sunday Times)

Haha I thought the whole idea is to reach 60 or whatever old age and be flushed with cash? And shouldn't salary increase with every job hop?

So to summarize it's spend more time to invest, with negligible value add early on... because the experience will be invaluable in the future! And since it's for practice/interest, not income, just put in enough money to retain interests will do.

piggo Wrote:So to summarize it's spend more time to invest, with negligible value add early on... because the experience will be invaluable in the future! And since it's for practice/interest, not income, just put in enough money to retain interests will do.

You have to increase the sums being invested over time, otherwise the compounding is not going to work for you. Investing $5k a year for 20 years to "learn" and then deciding to invest the lump-sum savings of $300k is nowhere near as effective as increasing the additional amount invested every year i.e $5k, $6k, $7k, etc. Even over 5 years you can see the difference between 5+5+5+5+5 = 25 and 5+6+7+8+9 = 35. And this is before compounding.

Investing more every year makes a huge difference because in the early years you build up the amount being compounded very quickly, recovering from mistakes is a lot easier, and by the time you have accumulated some skill, the money will already have grown quite a bit. It could mean the difference between a comfortable or a simple lifestyle in retirement. It could even be the deciding factor on being able to retire at all.

The more discipline you exercise in saving and investing in the early years, the more freedom you will have for spending in the later years.

"The more discipline you exercise in saving and investing in the early years, the more freedom you will have for spending in the later years." BY DOG:

Yes this is very true for an ordinary working class just like me.Those who knows only how to save but still do not know how to invest in the SGX take heart. i only knew how to live within my means until when i was 40 years old.

i "never" use debt for my 3 purchases of HDB flats. So i have some seed money in cash and in CPF. (Actually i have been schooling myself about investment in stock market form our National Library for years and years). i understand i must invest with certain principles and good rules of thumb.
i started to take the plunge at the age of 40 & the rest they say is history. A history that will end only when i am too old, too feeble or with dementia.
Now i am 63+. With our current financial position, my family should be able to continue living with our current life style when my wife stop working in one or two months time.
So take heart even me with not much education and earning power and besides only started to invest in SGX at the age of 40 till now is "making" it, i am sure all of you who blog here should be able to do better.
But remember , "Temperament is more important than a high IQ" as professed by WB. If not how can i have a chance to succeed?

(25-11-2011, 11:18 AM)Temperament Wrote: So take heart even me with not much education and earning power and besides only started to invest in SGX at the age of 40 till now is "making" it, i am sure all of you who blog here should be able to do better.

Thanks Temperament, this is indeed very inspiring!

I am in my mid-30s now and hopefully by the time I hit your age I should be very comfortable and also financially free!

(24-11-2011, 02:16 PM)Musicwhiz Wrote:

(24-11-2011, 10:50 AM)d.o.g. Wrote: In the beginning, absolute dollar savings trump investment returns. But later on, investment returns dominate, as capital compounds while salary tends to move in step jumps but gets eroded by lifestyle inflation (kopi becomes Starbucks, Honda becomes BMW, HDB becomes condo).

Actually, I can attest to this. When I first started out I was simply aggressively adding to my portfolio (inorganic growth) and the amounts I added came purely from my savings from salary and bonuses. This allowed the portfolio to grow slowly (but steadily) from a base of $5,000 back in early 2005 to about $200,000 today (admittedly, with some capital gains being reinvested back into the portfolio).

I've realized that as the capital base grows larger, the dividends also get a lot larger (not in % terms, but in absolute terms), such that you can better compound the returns. Now the total dividends for a year can actually be as large as twice or even three times our combined monthly spousal salaries (just to give an example). It used to be that the capital gains would be around that figure, but with compounding the recurring dividends have now reached that annual number.

So yes, salary tends to move very slowly (in fact, my salary is one of the most stagnant among my friends due to the fact that I jumped a few jobs and also due to the recession). The strange thing is most of my friends are earning much more but have a portfolio which is generating much less - which is something I can never seem to understand!

Guess I was luckier (or unluckier) to start with $30k instead of $5k :x

A headstart with a scholarship helps, along with savings from NSF time (and paid extra duties).

A number of my friends in army are actually actively saving up and investing, but interestingly, most of those who are doing that are accountants. Another group is those who started their own businesses, one of them having managed to secure $880k from Singtel recently for some business venture. Another has 3 businesses running now and an estimated networth of $2mil at 30 yrs old, completed with family and car. But his health isn't good, which makes me think if had sacrificed health for wealth. I'm 28 yrs old, and these friends are all around the same age. Among us, the group that started their businesses and are successful have the highest networth.


Lastly, of all the working engineers I know, it seems like I'm the one of the very few who actively reads into personal finance, as well as investing, etc. This includes engineers in my workplace, most of whom just invest very little or do not invest at all. While there are still quite a number of engineers in this forum, I believe that this is only a very small percentage of all engineers.

Hi Momoeagle,

Thanks for relating your experience(s).

I am not surprised that you mentioned those with successful businesses have the highest net worth. After all, they took risks and invested time, health and effort to building up their businesses. Conversely, those who had businesses which failed would be very much in debt and financial pain.

For us salaried employees, as d.o.g. has mentioned, the best way to get wealthy is the slow but steady way - saving and investing. And oh yes, please add insurance to boot as well (protection).

slow and steady...

with a bit of luck!

(25-11-2011, 11:39 AM)Musicwhiz Wrote:

(25-11-2011, 11:18 AM)Temperament Wrote: So take heart even me with not much education and earning power and besides only started to invest in SGX at the age of 40 till now is "making" it, i am sure all of you who blog here should be able to do better.

Thanks Temperament, this is indeed very inspiring!

I am in my mid-30s now and hopefully by the time I hit your age I should be very comfortable and also financially free!

Your 1st $200k probably took you 10yrs as it was coming mainly from savings. The 1st 10yrs is also the toughest as there're many expenses to be paid, especially for those who have gotten married, set-up their own house and perhaps with kids coming along.

I think your next $200k will take a lot shorter (likely within next 5yrs) to come along. The 1st $200k is already put to good use and working hard for you. There'll also be lower "CAPEX" demands (unless you choose to buy a new house) or you suddenly acquire expensive tastes.

After that, perhaps another 5yrs to double your Net Worth (your $$ need to continue to work hard for you). At that point in time, 10yrs from now, you'd be in a position to choose to retire from the rat race if you so desire. With some "luck" (more homework done usually equates to better luck), one single multi-bagger where you'd put in a substantial amount to invest could also shorten the time towards financial freedom.

I'm speaking from my own experience and I don't even do half as much analysis as you. I could have been lucky, but I'd also gone through a few major corrections and had not lost eveything... yet. So, I don't think you really need to wait till your 60s!

(25-11-2011, 02:33 PM)Musicwhiz Wrote: For us salaried employees, as d.o.g. has mentioned, the best way to get wealthy is the slow but steady way - saving and investing. And oh yes, please add insurance to boot as well (protection).

For those who had just started off with their careers, it pays more to put in more energy into your daily job. Given some luck and having a good boss, the returns will be much higher than investing in the early phase till mid-career of the work life.

After a decade of investment, my humble opinion of annual average investment return is..
5% return - a reasonably good investor.
10% return - a good investor.
15% return - outstanding investor.
20% return - outstanding investor and with some luck.

Anything that is above 20%, the god is smiling at you.

(25-11-2011, 05:18 PM)yeokiwi Wrote: After a decade of investment, my humble opinion of annual average investment return is..
5% return - a reasonably good investor.
10% return - a good investor.
15% return - outstanding investor.
20% return - outstanding investor and with some luck.

Anything that is above 20%, the god is smiling at you.

One decade ago on end-Dec 2011, STI stood at 1623.6. That was after 911 and there was fear and panic in the air. Today, STI closed at 2643.93. Even though it'd lost 17% this year, if you compare with 2011, it's still a +62.84%. If I simply divide by 10 years, that equates to +6.28%/yr.

So, you don't really need to be a good investor to get >5% return for the last 10 years! Just use DCA and invest in STI ETF will do!

STI was even lower in 2002 end and much of 2003. So, the annual returns would have been even higher for those who started the above at a later date. But, if you'd started after end-2006 (STI @ 2838), then too bad...