Retirement – Page 2 – Greg Fok Advisory

How do we navigate SVB and the banking crisis?

March 21, 2023March 21, 2023
by Gregory Fok

With what has gone on for the past week about Silicone Valley Bank and some stress levels tested, this is a good time to relook at how we can make great decisions and evergreen investment decisions in both good and bad times.

In times of crisis, there are many concerns and unknowns going forward, but in our practice, we focus on things we know as facts and information that we can control.

We focus on the things we can control and have an understanding of how investment markets work.

What are the strategies we can use to navigate this current environment and achieve your financial goals?

If there will be enough interest for a webinar like this, I will be happy to conduct one.

But in short, here are a few pointers.

1.Uncertainty is unavoidable

Remember that uncertainty is nothing new and investing comes with risks. Consider the events of the last three years alone: a global pandemic, the Russian invasion of Ukraine, spiking inflation, and ongoing recession fears. In other words, it may have seemed as if there were plenty of reasons to panic. Despite these concerns, for the three years ending February 28, 2023, the Russell 3000 Index (a broad market-capitalization-weighted index of public US companies) returned an annualized 11.79%, slightly outpacing its average annualized returns of 11.65% since inception in January 1979. The past 3 years certainly make a case for weathering short-term ups and downs and sticking with your plan.

2. Market timing is a hard game to play

Inevitably, when events turn bleak and headlines warn of worse to come, some investors’ thoughts turn to market timing. The idea of using short-term strategies to avoid near-term pain without missing out on long-term gains is seductive, but research repeatedly demonstrates that timing strategies are not effective. The impact of miscalculating your timing strategy can far outweigh the perceived benefits.

When the unexpected happens, many investors feel like they should be doing something with their portfolios. Often, headlines and pundits stoke these sentiments with predictions of more doom and gloom. For the long-term investor, however, planning for what can happen is far more powerful than trying to predict what will happen.

3. Diversification is your best friend.

Nobel laureate Merton Miller famously used to say, “Diversification is your buddy.” Thanks to financial innovations over the last century in the form of mutual funds, and later ETFs, most investors can access broadly diversified investment strategies at very low costs. While not all risks—including a systemic risk such as an economic recession—can be diversified away (see Principle 1 above), diversification is still an incredibly effective tool for reducing many risks investors face. In particular, diversification can reduce the potential pain caused by the poor performance of a single company, industry, or country.¹ As of February 28, Silicon Valley Bank (SIVB) represented just 0.04% of the Russell 3000, while regional banks represented approximately 1.70%.² For investors with globally diversified portfolios, exposure to SIVB and other US-based regional banks likely was significantly smaller. If buddying up with diversification is part of your investment plan, headline moments can help drive home the long-term benefits of your approach.

If you are a doctor, high income earner, are affluent and open to have an initial chat with no pressure, just drop me a message to connect with me.

FOOTNOTES

¹Consider that a study of single stock performance in the US from 1927 to 2020 illustrated that the survival of any given stock is far from guaranteed. The study found that on average for 20-year rolling periods, about 18% of US stocks went through a “bad” delisting. The authors note that delisting events can be “good” or “bad” depending on the experience for investors. For example, a stock delisting due to a merger would be a good delist, as the shareholders of that stock would be compensated during the acquisition. On the other hand, a firm that delists due to its deteriorating financial condition would be a bad delist since it is an adverse outcome for investors. Given these results, there is a good case to avoid concentrated exposure to a single company. Source: “Singled Out: Historical Performance of Individual Stocks” (Dimensional Fund Advisors, 2022).
²Regional banks weight reflects the weight of the “Regional Banks” GICS Sub-Industry. GICS was developed by and is the exclusive property of MSCI and S&P Dow Jones Indices LLC, a division of S&P Global.

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.

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.

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

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

¹In US dollars. S&P 500 Index annual returns 1997–2021. S&P data © 2022 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.
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.

1+1 = 3 (Only we can do that!)

April 21, 2022April 21, 2022
by Gregory Fok

We all know the formula of “1+1 = 2”. And that is correct mathematically.

But in financial planning, we can have “1+1 = 3”! How is that even possible?

To begin with, in financial planning, there are many strategies we can adopt to be creative in the way we reallocate assets to be smart about it and give yourself and your family a peace of mind to be able to sleep well at night. The above is just one of the many ways we can do it for the families we work with.

It starts with a conversation of what is most important to you, because getting to know you and your dreams and goals are most important to us, to be able to find a solution for you. All families are different and these concepts do not apply to everybody. It only applies for the right types of persons at the right time, with the right priorities.

Intention and goal

We were having a conversation with a family recently and their children have just started working and most of their large financial obligations are over. They started to ask, what can they do better with the wealth that they have accumulated over the years. They know in their mind, that they want to live well in retirement. At the same time, they want to be able to leave a legacy for their children as a token for them to be remembered by.

Current resources

They had a specific bank account of $1mil in cash that was earmarked for their children to be left behind as an inheritance. This was also a backup resource in case they ran out of money many many years down the road. So they do not plan to touch this money as they want it to be protected.

Smart strategies

If that was their intention, I told them that they could reposition half of it out so that when they are not around, there will be a guaranteed $1mil given to the children, on the very next day. With the other half of it, they could either spend more for themselves during their retirement or they could invest it and grow it even further if they do not intend to use it anyway. And if they reach a very very ripe old age and they are still around and might have run out money, they can utilize these money repositioned which would have grown much more than the bank account as well.

And that is how we can have “1+1 = 3”!

The catch

Like I mentioned before, this idea is not for everyone. These smart strategies are generally designed by the wealthy, for the wealthy and for the families to continue to be wealthy. And a person must be generally in good health for this to work.

Enhanced strategy

Rather than just giving this out to the children as a lump sum, you can have this to be a “Family Bank” for the on going needs of the children and even grandchildren when help might be needed. And once again, these assets can continue to have the chance to grow well progressively through proper financial planning. In such scenarios, it could be “1+1=4”!

If you would like to find out more and explore how this can help, we will be happy to 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.

Forecast of what is coming up in the next…

February 10, 2022February 10, 2022
by Gregory Fok

You would probably have heard online about some “investment gurus” are trying to predict what is coming up – whether it is a financial crisis or end of the world or war or something one way or another.

Whoever tells you that they can tell you that they can forecast what stock to buy at what time period so that you can make the most money in the shortest period of time – pls stay far away from them because no one can predict the future.

Even one of the best investors in the world, Warren Buffet, does not get it right all the time. A person could be “lucky” to make certain decisions that turned out right for them once. That person could even be right 3 times or even 5 times in a row. But to extrapolate that “luck” into the future over decades of investment time horizon is almost impossible!

Imagine going back to the midst of the pandemic, end of 2020 when the health crisis is still unfolding and the light at the end of the tunnel is nowhere to be seen. If anyone were to tell you that the stock market would have given you one the best returns in the history of investing, you would probably think he is crazy. But the markets did gave a return of almost 20% for the whole of 2021!

And if you actually study markets that go back all the way to 1920s before the Great depression, the overall equity markets over the long term had captured an average of 9-10%pa annualized throughout that period. However, it was not a smooth ride, it was an upgoing trendline but punctuated with unexpected ups and downs of the markets on a daily basis depending on what kind of crisis was going on at that particular point of time. Sitting through those extreme downturn periods was no fun either.

So rather than investing with a perspective where you can predict where the market is headed for the short term, set your goals and plan effectively in advance over various time frames on a globally diversified portfolio at a low cost. Work with an experienced advisor to ensure that you have different asset classes for diversification so that you have peace of mind. And sit tight in your seat while you let the investment markets be your best friend with time on your side. In fact, you can actually take opportunities to buy regularly along the way whenever the dips come in from time to time when discounted periods present itself. All this happens while you are tilting your entire portfolio towards areas of higher expected returns without the need to take on additional risks!

This strategy only works when you are able to control your emotions and have deep education and deep conviction about how markets work. Or if you know of someone who would like to journey with a trusted advisor who understands how markets work and want to find a simpler way to get to their life goals, reach out to us and we will be happy to have an initial chat to see if there is a fit to help.

Embracing volatility in investing

January 18, 2022January 18, 2022
by Gregory Fok

Given the recent years, it has been a volatile ride throughout the period from 2017 all the way till now in 2022. With the fresh start to 2022 with a volatile period, this is a stark reminder again that markets will go through volatility from time to time and it is part of any normal market cycle. Trying to predict markets in the short term will yield little fruition and even add on frustration. Focus instead, on our longer term goals and objectives, without trying to time the markets. Continuously add on to your investments over time and diversify globally to reduce our risks towards idiosyncratic risks which can never be predicted.

If a person had stayed invested and kept the course over the past 5 years, we can see that the markets only continue to grow and increase over time just by sheer patience. Speak with us and we can show you what the markets have resulted in a double digit growth over the past 5 years. Understanding how capital markets work helps us in our decision making for the longer term. We all know widely diversified portfolios will grow over time, as evidence based over almost a hundred years.

Going back in history

So we need to remember that over the past hundred years, our world has gone through depressions, world wars, financial and economic crisis, oil embargo and many unprecedented crisis. In some instances, the phrase, “This time, it is different.” comes up. The latest being the health crisis which almost caused the whole world to pause their lives. However, we have always emerged with a stronger returns of the equity markets due to innovation, stronger global demand and an ability for the human race to adapt and change for the better in all senses.

So let us remember why we are investing, sit tight, understand how capital markets work and embrace volatility to get to your goals in a smart way through proper diversification and asset allocation.

If there is someone whom you think will appreciate getting them to their goals in a way that reduces risks and increases wealth, without the need to speculate, we will be happy to have an initial chat with them.

Why does it pay to have a good financial…

December 11, 2021December 11, 2021
by Gregory Fok

John had just started his investment journey money with a robo-advisor at the end of 2019 before the covid-19 crisis occurred after seeing that the markets had grown well through in 2019. What was unexpected was that no one saw the health crisis coming along the way. What happened within the next year was an extreme roller coaster ride.

In the depths of the health crisis in March 2020, fear gripped him. The whole world was in uncertainty and turmoil and many of his friends had shared that the crisis would turn out to be even worse. He was shocked that the markets had dropped quite significantly (almost 30%) so he sold all the investments out.

After realizing the loss of 30%, the markets recovered very promptly, again unexpectedly. He knew that he needed to invest the money as the interest rates in the banks was miserable. He thought he would try again to try to invest, with another attempt. So in the last quarter of 2021, he decided to go back to invest into the markets just before the US elections. His investments actually did pretty well and grew about 10% during that period when he invested. Fear gripped him again at the end of 2020 as his investments had grown well and he read in the papers that markets are at ATH (all time high). And having experienced that dramatic loss early in the year, he decided to sell out and wait for the markets to correct again.

What was again unknown to him is that the markets continued to rally almost another 20% from the beginning of the year.

Instead, if a person had stayed invested throughout the entire time frame from the end of 2019 to Dec 2021, the investments would have grown by almost 40+% throughout the same period.

What are the lessons learnt for Deep Education?

It is very hard to time the market

Even if a person may get it right once or twice, he has to get it right multiple times with many entries and exits. In the short term, it is almost like gambling because it is very hard to know what the markets will turn out to be in the short term. However, we do know from evidence that markets had grown on a upward trendline since 1920s and will continue that path in the long term as long as there is innovation and constant desire for human consumption for a better life. However, there is going to be expected volatility in the short term.

Appreciating and embracing volatility

If a person expects that investments are going to be straight line upwards, he will be in for a rude shock. Whilst it is true that investments markets go up over the long term, it is going to be peppered with unexpected twists of ups and downs. So just like sitting a roller coaster, it is best to stay seated throughout the entire ride and not try to jump off along the way which is the most dangerous. Wait till the end point when it comes to a stop and you will be in safe hands.

Structure your investments according to your goals and time horizon

However, it is noted that some goals may be realized in the shorter time frame and if that is the case, we help you to design your asset allocation according to your personalized objectives. Volatility can be reduced significantly by reducing the equity exposure and inserting a higher allocation to bonds to dampen the swings. The shorter the time frame available, the lower the risk appetite should be taken.

Journey with an experienced advisor

Despite having known all the above steps, when the markets go crazy, which it will from time to time, people will continue to make emotional decisions as we are swayed by human behaviour. What you want is not the highest returns but you want to be able to achieve your goals safely with a strategy based on evidence and with someone who is experienced enough to hold your hands through. And in some unique cases, a person may not even need to invest or he has to find a way to spend more money, give more money to his charity or family members while he is still around.

Let us have an initial conversation to see if there is a right fit to get you to build CORE portfolios of 7 figures and above without the need to speculate and to use an evidence-based approach.