Blog – Page 6 – Greg Fok Advisory

What is the actual cost to stock picking?

September 2, 2021September 2, 2021
by Gregory Fok

When you read the financial media, there is a always an opinion from an economist to tell us, “This is the right time to sell. This is the right time to buy.” I bought into all that junk more than 10 years ago, thinking I was able to time the market. So almost on a daily basis, whenever somebody forecasted a particular direction, there is a huge temptation to do something to my own portfolio.

And it would have been increased trepidation when it was a stock or industry that I held that was being affected. Yes, I have to admit it was pretty exciting to see that you can make a quick buck over a short period of time, especially when I got it right. However, as the amount of stock portfolio grew, the emotions of fear and greed became more real as more is at stake. Which is why I only invested what I could afford to lose back then. (This is a bad strategy for wealth accumulation because the total asset allocation is usually tilted towards too much of cash or fixed deposits.)

When I was holding on to a stock that had gained 20% in value over a relatively short period, there is a strong temptation to sell out even though I know that the company will continue to grow and the fundamentals are there. Alas, when I decided to sell it, missing my appropriate price for a few days, the stock continued to soar by another 20%! Oh, I missed the boat, I would have thought to myself and would kick myself in the butt for selling it too early.

When markets turned topsy turvy during the financial crisis in 2008, all logic of buying in during the dips went out of the window, even though the company’s fundamentals are still strong. This is especially so when the crisis lasts for a few years. How many investors have the patience and tenacity to hold out the losses for 3-5 years and stick to their guns with all the bad news going on all around them, especially when media says this time is different. If you ever told any family member or friend close to you during that period, they would have all advised you to stay out of the markets in those very uncertain periods, for your benefit of not needing to lose sleep and money.

If a person had invested in during the period from 1990-2020 for a period of 31 years, into a well-diversified portfolio with equities and bonds in it across the world with almost 10,000 companies, you would easily have grown that same portfolio by 700-900% in value, depending on your risk appetite! Now, how many investors would have been patient enough to be able to capture that kind of gain? Hardly, because most investors (my past self included), would have had itchy fingers to try to put fingers into the pie to either sell out too early or attempted to time the market which we all know from history that it is something very difficult to do.

It is not just the financial cost of not seeing the long term gain in the markets, but the mental anguish, anxiety and emotional stress you go through regularly to find out whether the company can actually survive the next storm. Reading the newspapers and watching the TV can in fact create more stress due to that reason because all the financial media is doing is to force us to take some form of action and that split second decision actually creates mental stress on ourselves. And from history, many companies used to survive and thrive for many decades. In today’s context, the life span of listed companies is getting shorter, so do you want to continue to take that risk with your big goals like retirement which can span for 20-30 years?

So is there a different strategy that we can help you take? I have changed my strategy over the course of time and understand that human behaviour is a bigger component of investing successfully. And that has led me to save time, reduce anxiety and led to more financial wealth as well with a worry free retirement.

Would you like to explore an initial conversation together with no pressures to make any decision but to see if there is a fit in journeying together? Send me a message and we can have that initial conversation at my cost.

Financial Planning

Money and happiness

August 28, 2021August 28, 2021
by Gregory Fok

Whenever I start off a conversation with someone, the person always goes straight into asking me about financial products and what I think of the market.

I was in the midst of one such conversation recently and I stopped the person in his tracks. And I asked him what he was it that makes him happy. You see, most people think that accumulating the next million will make that person happy. However, studies have also shown that once a person earns more than a certain level of comfortable income of about $80,000 a year, the incremental increase of income does not equate to the same amount of increased happiness in a person’s life.

Money is just a tool to be used to create happiness. In fact, through the work we do, I realized that once a person knows what it is that drives a person or keeps a person happy in a non financial aspect of it, then the planning around the money management becomes more meaningful.

Just to give an example, I was having a chat with this person who was referred to me and kept asking me about what is the product that he can purchase and the strategy, the returns and all the very technical things. I responded by asking him, “Before I talk about all of the above, may I know what is it about the value of money that is most important to you?” He stopped to think for quite a while before he could speak. He opened up shared. When he was growing up, he grew up with very little financial ability in his life and his parents probably did not know better either. He studied hard in school, but because his family could barely make ends meet, he had to give up the chance of education for himself to start working early. He felt lousy that he had to go through this in his life so young and so he made it a point that he was going to make a lot of money financially so that he and his family will never go through what he experienced again. And that is why he invested aggressively and also lost quite a fair amount of money in stocks (which is not uncommon). At some point of the conversation, there was even a slight welling of tears in his eyes. But he also knows that his current way of planning is also not able to get him to his goals, which is why he was trying to find another advisor other than the person he met at the bank who was only focused on the product offered.

Unknowningly, that was an uncovering of a human’s deepest desire to understand why a person does what he does. Allowing him to share also brings in healing and forgiveness to a certain sense and he was really trying to ensure that he and his family will never have to run out of money or worry about not having enough.

When we are able to identify what drives him and why with a sense of purpose, it makes the planning so much more meaningful to both himself and myself. So when we structured a financial plan for him and journey alongside with him to keep him on track, he knows that he and his loved ones will not fall into such a familiar situation again.

Happiness means different things to different people so what we do is try to uncover, understand his background, family and see if we are able to ensure he will still be happy and financially taken care of.

Would you like to be able to plan your life with meaning and purpose with a sense of happiness for yourself? Let us have an initial chat to see if there is a fit and the first consultation is at my expense.

Business

Is it easy to time the market

August 19, 2021September 30, 2021
by Gregory Fok

The media is talking all about it. Now the market is going up, now the market is going to crash. However, if you look at even the economists who try to predict where the market is heading over the next 3-6 months, it is almost obviously showing that only 50% of them would be incorrect.

Think about it, back in Jan 2020, economists are still so positive for the year if you read the papers and the news headlines. We would also remember that what followed was unprecedented in an economic turmoil. There were certain airlines and tour companies that went bankrupt almost overnight even though they might have been in business for more than 5 decades.

So is it really that easy to time the market and tell for almost certainty what is going to happen over the next 6 months? If someone says that they know, be very wary of such calls and you probably want to stay far away.

Studies have also shown year after year, on the Dalbar survey, that a typical investor who tries to time the market does poorly in performance compared to the broad based equity market. And that difference could easily be a difference of almost 5x in actual value over a 30 year period. If you search that through the internet, you would be able to find all the statistics. And if you would like to see the studies and results, I will be happy to share that with you as well. Part of the reason is because when markets hit all time highs, investors get worried and pull out as they want to take profits off the table. When markets are plunging down, the fear of further losses prevent them from making confident decisions.

So as an investor planning your life, how should you plan your life to ensure sustainable and reliable growth with reduced anxiety so that you can get to your goals through an intellectual framework?

We always start with your end in mind by having a “Dream Conversation” with you. Knowing that and understanding where you are right now, we will see if you are able to achieve your dreams if you continue on the current path you are getting on right now. If you can, then great because you would be living your dream! If you can’t, we will utilize evidence-based strategies that are backed by almost 100 years of data and use the science of investing to give you the highest possible chance to get to your goals.

If you know someone who is thinking about saving themselves time to be more efficient, wanting to simplify life and get to their dreams confidently, while building more wealth, it all starts with a chat to see if we are the right fit for one another.

Financial Planning

Which is the best product in the market now?

July 27, 2021July 27, 2021
by Gregory Fok

This is a very common question that I get constantly. Most people come to me with a product perspective in mind. However, instead of trying to respond to that question, I will turn it back to them and ask, “What are you trying to achieve for yourself by investing in this ‘product’? What is your real dream you would like to have?”

If I take a few more steps back for them, will what you are trying to achieve with this $200k get you to your eventual goals?

For example, maybe this person wanted to be able to choose to stop working by age 65 and spend his time creating memories, travelling the globe for 2 months every year for the first 5 years. What will you need to put this $200k into, in order to help you get to your dreams and goals in the most sustainable manner without taking excessive risks?

Maybe after working it out, we realized that $200k will get him hardly anywhere near to where he wants to be given his overall financial situation. Then would that really be a goal you want to achieve? It could also mean that either he takes on higher risks or he might have to set aside more than $200k to speed up the process to get there, if that goal is so critical for him.

In some other personal customized circumstance, through the proper process of planning, it could also mean that he might not need to take much risks at all to get there. Maybe he has already arrived at his goal, without realizing it. In fact, for this person, it could even mean that he does not need to wait till age 65, but he could have his dream done earlier at age 55 instead of 65, just by shifting his assets and reallocating it appropriately.

What we do best for clients is to ask a few more questions to understand the dreams, desires of the person and their fears. We want to help them through the process of getting them to get to where they want. And not focus on the products we can sell… That is where dreams can be realized for you and you lead a more meaningful life.

We want to save you time, give you confidence and simplify your life for you so that you get the best out of life!

If this is something meaningful for you and if someone you think will benefit from having an initial chat with us, pls share this and we will be happy to be connected and see if there is a fit.

Financial Planning

Is there really a need to plan?

July 23, 2021July 23, 2021
by Gregory Fok

I was speaking to a couple on a meeting a few days ago and they both shared that they are both generally high-income earners and are very comfortable where they are right now. They said that even if they do not invest their money, they assume they would still be fairly comfortable when they retire 20 years from today and have enough money to last their whole lifetime.

So I suggested 3 things…

1. The above scenario totally works out as long as the assumption is that they continue to get their income going for the next 20years and they are kept healthy and they do not lose their job. Can they guarantee that it will not happen? Would a backup plan make sense to buffer that potential loss as life can be filled with uncertainties?

2. The second is more from a stewardship perspective. Doesn’t it make sense to be a little smarter and responsible with what has been gifted to you as resources for your way of planning? For sure, we do not wish to be the steward who buried the only coin given to him under the ground as shared in the bible. And eventually find that the only coin that was tasked to him under stewardship was to be taken away as he was not a responsible steward.

3. And finally, wouldn’t you like to be more confident in knowing where you stand, where you will be heading and if your assumptions you are going to adopt was correct? We used a software programme to allow a one-time keying in of their financial info (all in 20mins or so) and project that into the future and for them to keep and maintain their lifestyle. What they were surprised to find out was that they actually do “run out” of money by age 75 if they want to maintain their lifestyle. All we needed to do is to reallocate some money from the left pocket to the right pocket and they can be able to maintain their lifestyle till 99. And still have some money left over for the children without the need to take significant risks.

What this shows is that we are able to help families save time, build confidence of their future and simplify their lives to get them to where they want to be.

If this story sounds like familiar or you know someone going through the similar experience and asking the same questions, we will be happy to be connected for an initial chat to see if there is a fit.

Financial Planning

Does it make sense to invest on your own?

July 14, 2021July 14, 2021
by Gregory Fok

I met with a friend recently who has been investing on his own and he deems to be quite good at it, but he feels that it may not be easy to achieve his own retirement goals.

Upon prompting and asking a few more questions, I found out that he was trying to trade the market to try to consistently achieve 5% on his own and through his experience, it is not very easy.. He stays up at night to keep watch on the US markets and moves in and out between various companies, depending on his “watch list”. He gets right decisions probably about 8 out of 10 that he makes.

But even with that, he still feels that it is not easy to get a annualized growth year on year, over a prolonged period of time.

Whenever a company price goes up “too much”, he feels it is time to sell and keep the profits. When the company price goes down, there is the fear that the company might go into a downturn spiral due to some negative news. And tracking all these on a frequent basis takes time and emotional efforts to tide through the swings. And this does not even include the crisis periods that come along occasionally every few years.

It sounded like what I used to go through myself as an investor previously as well, unitl I changed my strategy a few years ago.

So I shared that the broad markets actually gave a return of 9-10%pa historically over the long term but yet many self investors have not been able to capture returns anything close to that over a 20-30yr period. Part of the reason is due to the emotional roller coaster we go through in our brain.

The human brain is wired to lose money in investments. When markets have gone up, it is hard to stay put and not sell out. And when markets are going through drops, it can be very difficult to maintain composure and stay invested, while topping up to take advantage of the opportunities. Our human mind is designed to keep us safe so anything out of the norm disrupts the pattern and we make emotional decisions driven by both fear and greed.

This becomes even more challenging when dealing with larger chunks of cash when investing. For example buying stocks with a $100k vs $1mil, which is primarily for long retirement funds is very different.

Do you know that there is a way to help you to…

1) simplify your life in decision making – the lesser decisions you make, the lesser the mistakes.

2) give you back precious time for your life – to focus on your varying passions.

3) give you the confidence to get to where you want in a way that is reliable and sustainble, which requires less speculation.

If you think you or your friends sound like my friend above, who are getting nowhere with your own approach to investing, we can have an initial chat to see how we can help.

Financial Planning

How high income earners manage their financial risk?

July 7, 2021July 7, 2021
by Gregory Fok

I was speaking to a senior chief executive of a MNC recently. He shared with me that he was so successful at his work that he had no time to look after his personal finance which is a common experience.

Here are some things I noted from the conversation.

1. Senior directors tend to be very busy and alot of their time is devoted to work with limited time for family.

2. They are worried and afraid that their high income ability tend to end earlier than most of their peers and they find it difficult to be rehired at a similar position or pay scale.

3. Their stress level is very high which makes them unable to continue the hectic pace for their careers over a long period of time.

4. The stakes are high to get to that position so they may not have many close friends they can share their real struggles with within the organization or even outside.

What can they do?

Find a trusted advisor who understands you and appreciates the situation you are in when planning for you.

Structure an investment plan to build a nest egg for themselves as quickly as possible in shorter periods and as early as they can. Time and automation becomes your friend.

Protect your income ability against unexpected health risks of critical illness as you have a strong earning ability over a 5 year period.

The investments should be automatically deducted from your income account and it should be a self rebalancing portfolio. This minimizes decision making which reduces mistakes and risks along the investment journey as well.

Build skillsets and close relationships with clients, staff and peers around you so that you become more difficult to replace as relationships and networks are an integral part of building any business.

Take time once or twice a year to focus on the important but not urgent things in life and you will live a much more fulfilled and balanced life.

Financial Planning

Plan your investments according to time horizons

June 28, 2021June 28, 2021
by Gregory Fok

Whenever someone asks me how much I should invest and what portfolio allocation should I choose, I would usually reply back with what do you actually want to achieve with this investment? Based on that, I will plan accordingly.

The key thing to note is the shorter the time horizon, the lower the risk appetite should be and more allocation will be towards bonds. The longer the time horizon, it can be a higher allocation towards equity risks.

So one of the things we do is to diversify in terms of time frames for the money required.

Even if someone is going to be retiring in the next 1-2years, it does not make sense to put all into cash or primarily into bonds.

There will be some funds a person will need within the next 1-3yrs and those should be in cash or fixed deposits..

And there will be some funds that you will not need till 3-5yrs later, 5-9yrs later, 10yrs later…

For example,

3-5yrs is for a general allocation of 40E/60B..

5-9yrs is for a general allocation of 60E/40B..

10yrs and above is for a general allocation of 80E/20B..

What is most important is to identify your objectives and be clear about it together with you and we can structure the planning for you and journey with you through the period of time to get you to your goals clearly, confidently and in a simplified way of strategic planning with less speculation and more wealth.

Financial Planning

What should I do with reduction of par policies?

June 24, 2021June 24, 2021
by Gregory Fok

Given the historically low interest rate environment we have been in for some time, with potentially foreseeable low rates going forward, the insurers have to reduce their projections to give consumers a more realistic range of projected investment returns.

Part of the reason is that insurance companies tend to have a higher bond allocation in order to give consumers the guarantees that the insurance companies provide customers but bond yields have been low.

To begin with, the primary purpose of insurance is for protection and safety. However, we also do know and acknowledge that insurance has it’s own limitations with regards to the long term investment returns.

How this impacts you is that if you are planning for long term goals like retirement, you will need to be able to have some of your portfolio into the longer returns of the market like a stronger allocation towards equity using the power of capital markets, but into a very globally diversified portfolio. But for someone closer to the retirement date, he would prefer to have it more in safety but there will still be some money that he may not touch till 5 or 10 or 15years later. So the right fit would be determined by your customised goals you have, where we can explore further together.

Therefore, we can add value to you to do an educational webinar if you have interest.

How do I build large amounts of money reliably and sustainably for long term goals like retirement other than from insurance products?
What is the research and evidence-based approach to investments that produces the higher expected returns?
How do I manage risks and volatility for myself while investing?

If you know of someone who would like to find out more on the above topics, I will be happy to have a session for you, your family, friends and colleagues. Thank you.

Financial Planning

Evidence Based Investing

June 15, 2021November 20, 2021
by Gregory Fok

In medical science, based on research, you are able to find ways to give the patient the highest possibility to reaching their goals of healing themselves. In financial science, based on research, you are able to use historical data to give the investor the highest possibility to reaching their long term retirement goals.

“We want to help you to reduce speculation and give you more wealth and peace of mind.”

Some of the myths

1.Investing is gambling.

However, if you look at capitalism and how it works, markets reward disciplined investors who are willing to stick through the longer period of investing time frame. Ownership into shares of a diversified pool of profitable companies that can generate future cashflows for many many years allows value to be created. Innovation and the need to want a better life through basic human consumption also leads to the value of companies increasing.

2. Timing is everything.

The advertisements and news of sensation sell. When to buy, what to buy, when to sell, what to sell… The evidence is that trading can be costly, both financially and even more so emotionally for you and your family.

3. Superior skill leads to better performance

It has been shown based on data that there are few professionals who actually beat the market. If professionals are finding it hard to do it, what more for an individual investor who does this for his own retirement? It has been evidenced that most individual investors underperform the market by a huge margin due to human behaviour and biases over the long term.

Since markets reward investors for taking risks, one of the primary decisions in designing your investment portfolio is to determine which risks to take and why you are taking it.

Academic research has identified several characteristics, or risk factors, that drive stock and bond returns. Eg, equity, value, small and profitable companies.

Each of these factors has been shown to increase the return of a portfolio. For example, the equity premium says that stocks tend to outperform bonds. That doesn’t mean that everyone should only own stocks. While stocks tend to perform better than bonds, they are also much riskier, and usually shouldn’t be used for short-term needs.

Our job is to help our clients formulate a strategy that exposes them to the appropriate risks to help them meet their personal goals, depending on their time horizon.