Financial Planning – Page 2 – Greg Fok Advisory

When was the last time you took a holiday…

December 28, 2022December 28, 2022
by Gregory Fok

In the past, I will go on a holiday trip and my mind is actually in “office mode”. I wonder how many of you have this same experience?

While I am physically overseas and with my family, my mind sometimes wanders off to check my work emails. On top of that, my clients who have access to my handphone will just msg me, as they may not know that I am overseas. I am not blaming anyone but myself because I have not learnt the art of decompressing to just be with family.

When I am with family, I worry about work. When I was at work, I worry about not being able to spend more time with my family.

So for this December trip, I will try to make a mental note to just be present with my family and enjoy the time with them.

So if I am unable to respond to you promptly, I apologize. In any case, I did send out an email of the contact person in case it will be urgent and that is the power of the team!

Would you love to be able to do the same for your holidays with your family as well?

When we get better at focusing on the right things at the right time, we become better people.

Do you agree?

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?

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!

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?

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 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!

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

How low can the markets go?

May 17, 2022May 17, 2022
by Gregory Fok

With the background of the markets where uncertainty is starting to increase, there are many questions at the back of people’s mind. One of the biggest question is “How low can it go”?

Just about close to the end of last year, I had a friend who believed so much in the Faang (Facebook, Apple, Amazon, Netflix, Google) stocks and had been stocking up a huge concentration into those few companies, because of the historical large returns in the recent times. And many investors continued to expect that to continue for those few companies, which based on evidence over decades shows not be true. Reality struck when the similar stocks are down roughly about 37% from the beginning of this year.

If you are investing into a single company like Zoom or Netflix or even worse, into cryptocurrency like Luna, it would have fallen by about 70%-99% and in some instances, it would have wiped out the entire value. This could be an instance of catching a falling knife where the company you keep buying into eventually disappears, as it can and will happen from time to time. Some companies can suddenly go into a situation when competition is stiff or the industry becomes obsolete and changes can happen fast.

Smart learning lessons

On the other hand, if you had invested into evidence-based strategies widely diversified on a global scale across profitable companies, total of 14,000 all across the world, you would still experience the fall (due to emotions of the investors), but the fallout would be much less significant due to diversification. In fact, the drop is only about one fifth of the drop as compared to the Faang stocks, which means it is still holding up very well, due to the right strategies in place.

If you were to be smart about it, based on historical investments over the past multi decades of history, with some allocations to bonds to it, the worst case scenario of the lowest would have been about 30-40% drop, depending on your allocation to bonds.

When diversified, the drop is temporary

The drops are in fact temporary on a globally diversified portfolio scale as there will still be companies that did not make it eventually, but there will always be new companies to add to the pool that are more profitable and reasonably valued. And with 14,000 companies on hand, there is no fear of companies going from profitable to bankrupt, except maybe on a small number of them. Depending on the personal objective of the goal and the kind of drop you can accept, we can fit the right allocation for you so that you can sleep well at night and expect the temporary drops.

When the recovery comes

After the period of temporary drops occur and investors have realized that the sell off is too absurd, investors will come back in again and that is when the recovery of the market occurs. And this can happen very quickly and sharply, sometimes within days. Returns catch up and will quickly match closely to the long term average market returns again. This is also based on evidence studied over a very long period of time that goes back to almost a hundred years of data.

Missing the best days

Missing the best 10 days of the best recovery days can significantly impact the overall returns of the markets by almost half the returns over a period of time. So it is best to stay invested for the longer term, turn off the noise on the news and happily go on a shopping spree and buy on a discount when markets are temporary lower for what is needed for the future.

What you can do

If you would like to find out more about the details above and are looking to journey with a financial advisor to take the financial stress away from you through education, we can always have an initial chat to see if there is a fit.

How do you manage LARGE amounts of wealth

March 25, 2022March 25, 2022
by Gregory Fok

I was having a conversation with a person recently who had come into a rather significant amount of wealth a few years ago.

I asked him what his experience had been holding on this amount of money which came overnight. He shared that he was worried about how he was going to manage it. If done right, he knew that he would be able to live well, and have enough left over for his children as well. However, if there were mistakes made, he knew that he would be the one known to be responsible for the downfall of the asset.

This was when I realized that holding on to significant wealth can be a pretty stressful exercise by itself. And since he did not know better what to do with it, most of it was left in the bank account and he took out a small portion to be invested into stocks that he was familiar with and unfortunately, Singapore Airlines was one of those bought before the covid 19 crisis. He was stopped in his tracks in decision making, for not wanting to make a BIG mistake but he knew he needed help so he was referred to us.

The first key priority was for preservation of wealth. With great power comes great responsibility so we needed to ensure that this cannot go down to zero. Holding on to single equity stocks will not fit this due to the fact that single companies can potentially get delisted or the business can close suddenly without time to react due to unforeseen circumstances and you can have a large allocation to a single company. One of the ways we do this is to diversify into 14,000 companies all across the world. This minimizes our risks to a bare low point. It is almost impossible for all companies to close all at the same time. In fact, in all periods, crisis or not, there will still be some other companies that can be doing extremely well. One example is the some of the technology companies that thrived during the covid 19 crisis.

Focus on what we can control

We will not be able to control markets and the outcome of it but we can control our human behaviour towards the circumstance in front of us. We can also control our asset allocation to the risk appetite that we are comfortable with depending on our time horizon of our goals and milestones that we need the money. We can also control where we position our investments. By tilting towards the evidence-based strategies of having smaller, reasonably priced and higher profit companies, we are able to get a higher outperformance of our investments over time with the opportunity to be able to rebalance it on a regular basis. We also focus on the fact that globally diversified portfolios have given disciplined investors exceptional returns over the almost hundred years of investing. We know that the markets move upwards in a trendline, but we have to expect that there will be unexpected ups and downs in the markets for some of the risk we are taking and it will be within his acceptable temporary risk.

Work with an experienced advisor who understands you and keeps you in check

Staying disciplined in extreme volatile conditions is also a critical component of human behaviour and working with an experienced advisor who has encountered this before to give you specified assurance of your goals and objectives will give you peace of mind.

You can always start by having a conversation to see if there is a fit for who you are looking for and if the financial advisor is a fit together to journey with you. Not all advisors may be right for you and not all clients may right for the advisor. The important thing is that there should be a match.

Can you invest with peace of mind?

March 9, 2022March 10, 2022
by Gregory Fok

Investing seems scary especially in the current market conditions under the Russian-Ukraine geopolitical issue and when lives are at stake.

Is there such thing as investing with a peace of mind? How is that even possible?

It takes a lot of education to understand how markets work based on evidence and science and how you can use it to your advantage. Part of the reason why you may not be having a peace of mind is that you do not have a clear plan of strategy in mind. You are only investing on news and emotions to achieve high returns, rather than with a clear plan to get you to where you want to get to.

What is your real objective?

Go back to your main plan of what is the real objective you are trying to invest in the first place. If it is to achieve the highest returns, please do not read any further. This will not make sense to you.

If you are like most people, you know that one of the key reasons is to be able to build wealth for the lifetime consumption you are going to have based on your personal individual goals you set for yourself. It could be sending your kids to a tertiary education, or paying for a down-payment for a car in the next 5 years, or your retirement funds over the next 10-15years. Sometimes, it could be to build a legacy for your children and give to the family or charity of choice.

Build a portfolio that can withstand the test of time, regardless of the crisis

Design and build a portfolio based on your desired goals you want to achieve and ensure that it can withstand the test of times when crisis comes. When you have a portfolio that is globally diversified across the world, you minimize the risks of losing all your money, because even when a global crisis occurs, there are still some businesses that can be making profits and growing in the midst of crisis, just like what we saw in the Covid-19 situation in 2020. But if take on over-concentration risks, you might run the risk of creating havoc and emotional stress on ourselves and our portfolio.

Expected the unexpected

There is risks in investing, but there is also a way to take on calculated risks only. Take off the idiosyncratic risks that can occur in any company or country or sector by way of diversification. Once that risk is minimized to the point where it is at the lowest, then expect that some volatility will be the price to pay for an increased premium of returns, depending on your time horizon. That is the way to reduce your risks while capturing the upside by finding evergreen strategies to always outperform the markets through smaller companies, higher profit companies and reasonably priced companies. Rebalancing is key to realize the profits and reposition them to continuously buy into the value, smaller and profitable companies.

Reframe the way you invest

The way most of us invest is driven primarily by emotions and what the industry has caused us to think, which is that we are smarter than the markets, so we will be able to forecast and predict the future. While a person could be lucky once in a while, it is a futile exercise if you stretch that time horizon longer because the reality is that a person is able to do that in a flip of a coin. Instead, we use research materials to understand how markets work and study the history of markets to apply the science to investing to get us the highest chance of achieving our big long term goals in life so that we can sleep in peace through wars, health crisis, economic crisis, technology crisis and the list goes on.

Put in the hard work

Unlike going to the gym where more action leads to better results. In investing, less active action leads to better results with peace of mind. The hard work in investing is patience and discipline. Patience is the ability to sit through periods of volatility when expected returns may be against your favour. The time will pass when the returns will come back to normalization, just like in the history of all crisis for the past 100 years.. Discipline to stay in the strategy and hold it out even when the going gets tough will be another virtue to have. You probably can imagine that there will be another way to make a “Quick buck” through alternative new strategies that will constantly come up. Staying invested using evidence-strategies proven for almost a 100 years keeps us disciplined. We need to stay the course, and not keep changing lanes to avoid an accident in our investment portfolio.

Finally, speak with an experienced investment advisor who looks into what it is you are trying to achieve personally and see if they can help you to reframe the perspectives of financial planning to get you to your big goals in life.