Gregory Fok – Page 4 – Greg Fok Advisory

I will be the next Warren Buffett for Singapore!

November 14, 2022November 14, 2022
by Gregory Fok

That was my dream and goal when I first started my investment journey almost 20 years ago. I am not sure how many of you actually secretly thought the same, just like I did.

Warren Buffet made investing into single stocks sound so easy, and being an engineer by training, I started to find ways to make sure that my dream will become a reality.

I studied many books, theories and concepts of how I could make it all happen. I also spent thousands and thousands of dollars on courses to ensure that I am armed with knowledge. I started to read and study the annual reports of my favourite companies with their cash-flows, balance sheets and profit and loss statements in detail.

I mean, I am a smart guy with a strong heart and am disciplined and patient enough to attempt to get the results I wanted. I will be the next Warren Buffett! I wanted to be in total control of the companies I understood fully and will be comfortable to invest.

This all sounds logical when markets are good and when I have bandwidth to have a sound mind.

However, reality sets in when the market conditions soared and plunged very quickly. Human behavior took over and the emotions and swings of the markets become more than what one normal person can handle. I might have gotten great results 3-5 years in a row, but all it took was one wrong move and it wipes out all prior efforts or missed the next big growth.

After more than a decade of bad investment experience, I had to be humble enough to know that one can never predict nor forecast what is to come in the short term. Anything in the short term is usually luck just like in a casino and does not require skill.

I learnt that investing is more managing emotions than logic. Emotional decision making creates stress and causes more complexity in the outcome because I end up holding suspended stocks with no coherent approach to investing over time.

I still had to find a way to invest to BIG long term goals of retirement which may possibly last decades.

What evolved was a search for not the best product, but a way of life in investing with the right life philosophy with values built in. With that, I used evidence based strategies and data with research of almost 100yrs to identify the highest chance of success, creating the odds in our favour over the longer term. I do not need the highest returns but the highest chance of achieving my goals.

There was a lot of unlearning and relearning a new way of looking at investing, but it is definitely more fulfilling and allowing a better investment experience and a better outcome.

I’m constantly on the search for reviewing what is best for our clients so that we all can have success together, not just in wealth but more importantly, in life as well,

Anyway, clients want peace of mind as a higher priority, do you agree?

Inspiration

Should I be shifting more money to cash now?

October 17, 2022October 17, 2022
by Gregory Fok

Given the past few days of volatility, it can feel concerning and scary. I can totally understand that because our human mind is wired to prevent us from making sound decisions when it comes to investing! The reason is our brain wants to protect us from danger, which is a reactive decision making process.

Whenever things are uncertain, that is where it comes the sweet spot between danger and opportunity as the Chinese proverbs say.

Well, if you plan to use the investment funds over the next few years, then maybe it might be better to shift money to cash because we can never know what will happen in the short term.

And if that was the original intention, you should have a lower allocation to equities to begin with.

But if your goals are further out, this can be an opportune time to buy on discounts. We may never be able to buy with the highest discounts but we know in 5-10yrs, on a broad diversification, you know that you would have made a great decision.

The right allocation mix would be the key to successful investing.

Clarity of your goal gives you better management of emotions.

Volatility is the “emotional price you pay” in order to get returns you want over time.

Having allocation to single stocks, single bonds and concentrated areas is generally bad assumption of risks.

If you had just bought into a low cost globally diversified portfolio risk adjusted based on your specific goals, this can be a great time to take advantage of the discounts.

Just like in the picture where you see art pieces, financial planning and investing is both an art and science. We use both abilities to our advantage.

If you are a doctor or wealthy individual who would like to find out how you can grow wealth with peace of mind and confidence, we can always give you a 2nd opinion to see your allocation, with regards to reduced risks, reduced costs, reduced volatility, enhanced diversification and enhanced returns together all at the same time.

Financial Planning

Mistakes that doctors and high income earners make

September 9, 2022September 9, 2022
by Gregory Fok

I have been working with doctors and high income professionals over the past 17 years and here is one mistake that they make.

Imagine asking a General Practitioner (GP) to go into the operating theatre to do a surgical operation on his own family member. Do you think that they will be able to achieve the best medical outcome for the family member?

There are 2 things to think about in the process of financial planning.

🦉 Expertise – many lack the ability to see blind-spots.

🦉 Emotions – the decision making process can be emotionally driven and can lead to poor outcomes.

Some doctors try to invest on their own, which is fine, but they know that they can get a better outcome when they work with a professional.

As an example, some mistakes when investing on your own…

🚀 Time – if you spend more time with your patients or profession, you make more money than spending time to trade the market. And better still, spend more time with your family since work life is already so hectic.

🚀 Effort – making a decision of whether to buy, sell or hold can take emotional control over your mind and distract you from your professional work at large.

🚀 Actual results – it has been evidenced that trying to time the market and pick the right stocks over a long period of time is almost the same as gambling. Why play that game when there are better strategies.

🚀 Over concentration and over conservative risks – you take over concentration risks on a small part of portfolio and are over conservative in the larger parts of portfolio.

🚀 Poor outcome – this leads you to finding it hard to reach your big goals like retirement for 20 or more years, except by sheer hard work on your part. Though you know that there should be a better way.

🚀 Poor experience – due to the poor outcome and results, over time, you find that it does not make sense to invest and that slows down the ability to reach your big goals.

🚀 Tax considerations – for the extremely small population that do well in investing, your family might be eventually hit with a inheritance tax bill that can go as much as 40% especially if you are have US stocks and investments.

🚀 Emotional judgement – imagine that you just found out that the stock you have a huge holdings in just came out in the papers with negative news. And you are going into a very important meeting or surgery in the next 1 min. Your concentration level drops and you may not be effective in decision making on both the professional and financial side.

This is just on the part of investment planning. There are many other areas to think about in financial planning like wealth and income preservation, asset distribution, tax planning and others…

What we do as financial advisors is to prevent you from the big mistakes in life!

Insurance

How to plan for retirement?

August 13, 2022August 15, 2022
by Gregory Fok

5 areas to plan my future for retirement.

I have been getting people asking me what they can do to plan their future, especially when it comes to retirement planning. So here are some broad scopes of how you can plan.

5 areas of planning for retirement.

🔥 Insurance planning

Most people will generally be healthy but you never know when an illness or accident can throw a curve ball at you. There is a phrase in Chinese that says you can die but you cannot fall sick because the medical costs – related and unrelated can wipe out your wealth. Plan early to reduce costs.

🔥 Investment planning

Inflation does not affect you in the short run, but over a period of time, it can erode your spending capability. Growing your wealth systematically in a sustainable way is critical, so use CORE strategies to ensure peace of mind and higher expected returns.

🔥 Tax planning

Taxes are getting higher throughout the world due to COVID and high government spending. The mass affluent will be the ones most badly affected by this. Do you know that your investments can be eroded by taxes as well, if not planned right?

🔥 Debt planning

You should be reviewing and looking into your loans. Minimize the use of debt. Debt is a double edged sword, if used inappropriately, it can cause lots of emotional stress. We have seen wealthy individuals who drown in debt.

🔥 Estate distribution

Eventually all of us will no longer be around. So it is important that we leave and ensure minimal costs, confusion and conflict for the surviving members of the family. Assets that are illiquid like properties and businesses are the ones that cause the most conflicts. So we help redesign the portfolio to maximize efficiency and simplify lives.

The above is just a broad base way to look at it but everyone person has either a pain point or a dream to do something special. We listen and try to understand what it is that you really want so that you get the best out of your life!

Reduce your risk and stress. Plan your dream life. Spend your time focusing on what passions you have in life, get peace of mind.

Inspiration

Why am I not making money in investing?

July 20, 2022July 20, 2022
by Gregory Fok

When I started investing about 20years ago, I read about Warren Buffett. I really wanted to be like him.

He had the ability to read a company profit and loss statements, balance sheets, cashflows and turn these companies into profits! That sounds amazing! And of course, I learned the power of compounding effect as well.

So I diligently put in lots of hard work, to study materials, learn how to read financial statements, paid lots of money for courses to be able to be like Warren Buffett.

Unfortunately, after more than a decade later, from personal experience and many people I talk to and survey of investors, I realized that most investors actually lose money and underperform what the markets would have rewarded them with over long periods of times.

These are some of the reasons for this.

1. Emotions biases play a VERY big role in clouding our emotional decisions. This is a very big big reason with many factors that can derail us.

2. Most investors look at investments at singular products and not at the big picture to how it fits into their overall finances.

3. Working harder in investments actually led to worse results because constant activity leads to more emotional roller coasters and in turn, to more emotional decisions.

4. The perception of most investors is that they can buy the right stocks or time the market. You might get it consistently right 3-5 years in a row and all it takes is a few crisis to rattle you and bring you back down to earth and you may never recover from it.

5. You were not clear of the personal objectives to begin with.

6. You look at your investments on a single time period basis eg. 3 years, and if it is not making money, you pull out. If it makes money, you put in more. What you are effectively doing is buying high and selling low. It does not make sense right?

7. You are not emotionally prepared for temporary losses from time to time.

8. Mental accounting and emotional accounting is different. When we see our investments as products, we take on concentrated risks in certain stocks and lesser in others. A common example is someone investing significantly on one single stock and lesser on many others and a huge pile of cash on the side for fear of making a wrong choice of stock. So if you look at the overall allocation, the total gains on that one stock, even if it is large, on a total overall portfolio (including cash), may be only a fraction of it. Part of the reason is a drag of dead weight by large cash allocation.

9. I did not have an investment philosophy I could stick with in both good and bad times. There are many many times I sold out way too early!

10. I should not just go after the highest returns! It was not about the highest returns, but more importantly I can sleep well at night, have peace of mind and yet still achieve reasonable overall returns on my whole entire portfolio with significantly reduced risks.

I went back to the drawing block and asked myself some hard questions to rewrite the way I grow wealth.

If I continue the way I do, will I get to my big long term goals like retirement which will run into millions if I want to sustain a reasonable lifestyle.

Otherwise, I had to really do something about it.

I did, through a different set of lens, with significantly reduced risks, I can sleep well at night, have peace of mind and get better potential returns! What a better way to live my life now!

If you or someone you know might want to put on a different set of lenses to help you get to your long term goals, we can have a initial chat to see if there is a fit.

Financial Planning

You need a spending plan

July 14, 2022July 14, 2022
by Gregory Fok

Most retirees close to, or starting retirement do not dare to spend for fear that they will run out of money.

Most friends and well-wishers may ask them to hold back spending for fear that they may not have enough money for the future, especially if they live longer than expected.

The reason why most people do not dare to spend in their retirement is because they are worried about running out of money and have to rely on the family around them. It is human nature not to want to rely on others and be self-sufficient, or at least for the generation who are currently in their 50s and 60s.

We start with asking the question of what does an ideal retirement life look like for you?

Through this single question, it really opens up many possibilities and even opportunities. Sometimes, we throw our dreams away because we are too fearful. And that becomes a very sad retirement life.

When we know what really drives you and the kind of ideal life you would like to have, it is easy to build a spending plan around it.

In a recent conversation we had, this person had dreams of wanting to bring her family to be closer. And she wanted to bring the entire family on a cruise, including all her 4 grandchildren. But she knew it required more spending.

We helped her create an investment strategy to reposition her total assets so that she can provide a higher income sustainably over the long term, while maintaining capital, without the need to worry about volatile markets which may happen from time to time.

When she had confidence that the strategies were sound, she went ahead with the cruise. It was her way of bringing the family together to bond with no distractions. We planned for it and she had her wish come true.

When she came back, she shared how she saw her grandchildren enjoying the time on board the ship, she had a big smile on her face and she felt a sense of joy and purpose. Family time was the most important to her and she said she wanted to do this again! She is definitely able to still be able to provide that.

We were able to give her the confidence of being able to spend more without the worry of running out of money through smart planning with us. And that was something that changed for her to instil the power of possibilities at her age.

Have you thought about what your ideal retirement life would look like for you and still have enough to last you?

Financial Planning

What is it about the value of money that…

July 2, 2022July 2, 2022
by Gregory Fok

Life has been pretty comfortable and they are living the life of a dream, in terms of their home, their car, their lifestyle, their career and their family! Life is good so why should they need to change anything….

This is a couple who are high income earners. Husband is a doctor and wife is a senior director in a MNC in their 40s with 2 young children. They are comfortable with their income earning abilities and are competent in their work. Life has been pretty comfortable and they are living the life of a dream, in terms of their home, their car, their lifestyle, their career and their family! Life is good so why should they need to change anything! If you were looking at them from the outside, you wished you were in their shoes and time stood still. High income earners usually do not think that they have much money management issues to deal with because their income has been great.

Since I work professionally with this target group of high income earners and doctors, I was personally referred to meet with them. As we started to ask them some life questions, I begin to delve deep into some unmet needs they actually are feeling that they are drowning out with.

I asked them a question that is not the typical of a financial advisor, “What is it about the value of money that is most important to them?” The initial answers are the basic replies to provide for family and fund their lifestyle they have. Deeper into the conversation through appropriate questions, the real meaning behind why they were so concerned about having wealth is because the wife grew up in a background where the parents were constantly not around and she wanted to build the wealth quickly and head off to an early retirement and spend more time with the family. She also had the need to “Prove to her extended family and friends” that she was able to succeed in life due to her family upbringing.

Halfway through the conversation, she eventually broke down and shared that she was hurting and struggling internally actually. She was torn between the fact that she was a successful working mum but that meant there was not much time left for the children. So she wished that she does not miss out the growing years of her child especially the important milestones but yet wanted to be assured of the future.

We put things in perspective for them (showing them the financial planning projections by repositioning their existing resources with appropriate core evidence based investment strategies with us) and if she needed to take a more part time work role which meant a significant drop in her income. But she gets to achieve her goal of spending more time with the kids now till the time they turn late teenage years where they became more independent. And she still gets to keep some parts of the good lifestyles she is already having through proper planning and growing their wealth. They were still able to achieve all of their goals financially with confidence and reliability by starting to plan early.

Having a thought provoking conversation like that can be challenging and maybe painful at times, but if taken with a good intention to improve your lives for the better, you can come out of it more inspired about your future. Our strength is to integrate the life conversations and goals, to connect them to the financial planning side of things so that you live your best life forward.

So, what is it about the value of money that is important to you? Are you ready for the deeper conversation? Reach out and start to live your dream today!

Business

Business owners consideration for transfer of assets

June 24, 2022June 24, 2022
by Gregory Fok

When a business owner is young, he uses his blood and sweat in exchange for an income he works hard for.

Once he has built it to a reasonable size, he needs to have the following considerations.

1. Who is going to take over the business and the liabilities when the key person is taken out?

A friend of mine had a strong business and successful one for many years and were thriving. One day, during dinner, the partner choked and died suddenly on the spot. Since the partner was the one with all the connections and loans, when the partner passed, the liabilities were called on by the banks almost immediately. Customers trusted that particular partner but when my friend tried to salvage the business, the customers changed suppliers. Cashflow was very tight and eventually the funds dried up promptly. The business had to be closed and there were even outstanding payments that needs to be settled.

2. Who is going to take care of the family expenses?

As a business owner, your purpose of the business is really to take care of your family. However, when there are outstanding payments to be settled and frozen liquidity, the business dries up all the funds and usually the family might not be left with much.

For example, if your family needs $10,000 a month for expenses and you would like to provide them for a period of 20years, the total provision for the family will work out to be about $2.4mil.

3. Funding

Funding of the above scenarios can come from a variety of ways.

a) One is to keep and hold cash and wait for the sudden need to use the fund. However, it is the most ineffective use of funds.

b) The second is to use discounted dollars from your revenue of the business (This is exactly what Walt Disney did to access funds when no banker was willing to lend).

For example, if your revenue drops by 2-3%, will your business by badly affected? If your revenue grows by 2-3% more, will you call for a big celebration?

But what if we reposition that 2-3% wisely, that can protect the 100% of your revenue. Wouldn’t that make sense? And on top of that, after many years of funding, there can be another mountain of asset that you have created for yourself that is totally available for use for the future. Wouldn’t you like to be smart, just like Walt Disney did?

4. Legal aspect

Now that you have settled the above financial portion of your life, have you written your will and trust to solidify the decision of who will be the next person to take over which asset from you? Every asset class has pros and cons in distributing.

For example, illiquid assets like property and businesses should try to give to more than one party to avoid confusion and conflict.

What we can do for you is to combine the power of the finances and the legal aspects of planning your business so that it can continue to thrive for a very long time!

Financial Planning

Structured deposits – is it really safe?

June 21, 2022June 21, 2022
by Gregory Fok

Who would like to cap all the upside returns and take on all the downside risks and pay a fee in between?

Most investors prefer to do the opposite, which is to minimize your downside risks and increase your upside returns but if you do not read in between the lines of the structure, you might be in for a rude shock!

But if you have seen how a structured deposit is actually designed, it is meant to work unfavourably for an investor and all benefits reward the financial institution or bank.

I was speaking to a specialist doctor end of last year and he shared very optimistically of how his banker had been making good money for him in these “safe instruments” with lucrative returns.

I tried to find out more and he shared that he was using structured deposits and that the risks were minimal and the returns were fairly decent. I highlighted the risks and rewards but it fell on deaf ears. With a “safe instrument” of a structured deposit that can give a range of 2-4%pa in less than a year, who would think that there is a better strategy.

When I was having a conversation with this same specialist again this year in recent times, he shared of how the markets have turned. His $1mil worth of structured note was breached and he had to hold onto the underlying share of the company.

The last valuation he saw was roughly about $250k and it was all on a very concentrated allocation onto one company which detracted away from being able to sleep well with no peace of mind. His biggest worry was now whether to continue to hold on, hoping for the single company to recover or to diversify his portfolio to reduce his risk further in case the company went into further decline.

This would have been the plight of many investors, I could imagine, especially with the sudden change of events over the last 6 months.

If you know of someone who would favour peace of mind and be able to sleep well at night, and want some help with their finances, I am sure we can have an initial chat with no obligations.

https://www.straitstimes.com/business/invest/structured-deposits-riskier-than-fixed-ones-but-have-better-yield

Inspiration

Worried About Stocks? Why Long-Term Investing Is Crucial

May 30, 2022May 30, 2022
by Gregory Fok

By David Booth, Executive Chairman and Founder, Dimensional Fund Advisors

We are living in a time of extreme uncertainty and the anxiety that comes along with it. Against the backdrop of war, humanitarian crisis, and economic hardship, it’s natural to wonder what effect these world events will have on our long-term investment performance.

While these challenges certainly warrant our attention and deep concern, they don’t have to be a reason to panic about markets when you’re focused on long-term investing.

Imagine it’s 25 years ago, 1997:

J.K. Rowling just published the first Harry Potter book.
General Motors is releasing the EV1, an electric car with a range of 60 miles.
The internet is in its infancy, Y2K looms, and everyone is worried about the Russian financial crisis.

A stranger offers to tell you what’s going to happen over the course of the next 25 years. Here’s the big question: Would you invest in the stock market knowing the following events were going to happen? And could you stay invested?

Asian contagion
Russian default
Tech collapse
9/11
Stocks’ “lost decade”
Great Recession
Global pandemic
Second Russian default

With everything I just mentioned, what would you have done? Gotten into the market? Gotten out? Increased your equity holdings? Decreased them?

Well, let’s look at what happened.

From January of 1997 to December of 2021, the US stock market returned, on average, 9.8% a year.¹

A dollar invested at the beginning of the period would be worth about $10.25 at the end of the period.²

These returns are very much in line with what returns have been over the history of the stock market. How can that be? The market is doing its job. It’s science. Investing in markets is uncertain. The role of markets is to price in that uncertainty.

Investing in markets is uncertain. The role of markets is to price in that uncertainty. There were a lot of negative surprises over the past 25 years, but there were a lot of positive ones as well. The net result was a stock market return that seems very reasonable, even generous. It’s a tribute to human ingenuity that when negative forces pop up, people and companies respond and mobilize to get things back on track.

Human ingenuity created incredible innovations over the past 25 years. Plenty of things went wrong, but plenty of things went right. There’s always opportunity out there. Think about how different life is from the way it was in 1999: the way we work, the way we communicate, the way we live. For example, the gross domestic product of the US in 1997 was $8.6 trillion and grew to $23 trillion in 2021. (Read more about the merits of investing in innovation.)

I am an eternal optimist, because I believe in people. I have an unshakable faith in human beings’ ability to deal with tough times. In 1997, few would have forecast a nearly 10% average return for the stock market. But that remarkable return was available to anyone who could open an investment account, buy a broad-market portfolio, and let the market do its job.

Investing in the stock market is always uncertain. Uncertainty never goes away. If it did, there wouldn’t be a stock market. It’s because of uncertainty that we have a positive premium when investing in stocks vs. relatively riskless assets. In my opinion, reaping the benefits of the stock market requires being a long-term investor.

By investing in a market portfolio, you’re not trying to figure out which stocks are going to thrive, and which aren’t going to be able to recover. You’re betting on human ingenuity to solve problems.

The pandemic was a big blow to the economy. But people, companies and markets adapt. That’s my worldview. Whatever the next blow we face, I have faith that we will meet the challenge in ways we can’t forecast.

I would never try to predict what might happen in the next 25 years. But I do believe the best investment strategy going forward is to keep in mind the lesson learned from that stranger back in 1997: Don’t panic. Invest for the long term.

FOOTNOTES

²Data presented for the growth of $1 are hypothetical and assume reinvestment of income and no transaction costs or taxes. This value is for educational purposes only and is not indicative of any investment.