Retirement – Page 3 – Greg Fok Advisory

Most people invest the wrong way

October 18, 2021October 18, 2021
by Gregory Fok

Many studies have shown that most investors on their own typically lose more than half of the actual market returns over the long term. These studies can be found from the Dalbar studies. From the same research body, you can also identify that the average equity investors widen that gap during and after any particular crisis. The reason is that there would have been movements to shift the investments in and out of markets, caused by emotional behaviour of fear and greed. In some cases, over the short term, some investors actually outperform the market due to luck, not skill. However, once you see that over a much longer period, the studies would once again show that the average investors underperforms poorly.

So how do we overcome this problem?

One of the things you can do is to start getting yourself educated and create confidence and conviction over the findings. This can take a fair amount of time to understand and explore, but through working with a trusted and experienced advisor who has gone through multiple crisis in their careers, that can be of great help.

The other thing you can do, is to know why you want to invest. What is your objective and your end goal. I am not talking about the numbers but the why behind the numbers. What drives you? What gets you to financial freedom and why is that so important to you? A financial coach is not just one to get you to your goals, but who understands the background reason to why that is so important to you. When you have that better understanding for yourself, through discovery with an experienced financial coach, you will have a better handle of how you want to manage your financial plan.

Being smart

Once you find out your why and have your retirement plan, it is all about implementing and sticking to the designed asset allocation strategy together. Your total portfolio will give you an overall total return rather than trying to do a little bit here and there in a way to diversify your portfolio. We create a CORE strategy together with you. So there will be a way to reduce anxiety, preserve wealth and grow it at a meaningful pace so that you will be comfortable with it. In the midst of the process, the education and conviction process is also important to continuously add value to you to give you confidence about planning ahead.

If you would like to explore finding a way to invest in a way with a total portfolio that is reliable, sustainable, provide you peace of mind with reduced anxiety of speculation, I will be happy for an initial meeting with no obligations on either parties.

How do I ensure a comfortable lifestyle?

September 21, 2021September 21, 2021
by Gregory Fok

Many people dream of travelling, exploring and touring the world, hanging out with friends for coffee, lunches and high tea when they eventually stop working… They also may want to be able to continue to drive a car, shop and dine wherever and whenever they would like to.. Basically, a person’s lifestyle should not end when a person stops working and retires. In fact, studies have shown that they may actually spend more than when they were working because they did not have the time to do all that.

This sounds like a dream life, and the reality is that it costs some money. And inflation and longevity is not going to make it any easier for you.

Just to give you an example, if you are now 35 years old and would like to have a lifestyle of $4000 a month in today’s context, with a projected inflation rate of 2.5%. This same lifestyle would be $8390 a month by the time you turn 65 years old! And if you do happen to live for another 20 years, that figure that you would need by the age of 65 will probably be at least in the region of a couple of million dollars because the cost of living will still continue to escalate past the age of 65. That is just unimaginable for many people! Of course, I am over-simplifying the calculations because I have not added your other assets you have built over the years, but that figure will not be too far away from the truth.

So the question is how are you going to get to that couple of million by the age of 65?

We use CORE^TM strategies that build large amounts of wealth in a way that is evidence-based, reliable, sustainable and gets you to the goals in the highest possibility of getting you there. All these are done without need for speculation and gives you an ability to grow wealth with reduced anxiety through an appreciation of risk and volatility. But it takes 2 hands to clap along this journey.

Just to give you another example, if a person had set aside $100,000 at age of 35, with an addition of $1500 a month till the age of 65, with a projected compounded effect of 6%, it will get the person to a projection of almost $2million by then with the power of compounding effect! Every person’s situation is different and we will help you plan out what is practical and possible, customized to your personal circumstance. Sometimes, it might mean starting smaller and increasing the additions as you progress with time, but we will find ways to structure something to get you there. At least, even if you do not get to the moon, you will be at least amongst the stars.

If you would like to, at least have an initial chat to share with us what your dreams, visions and fears are, we shall see if there is a fit between us. And if there is, we will journey and help you through the trust based relationship to get you there with the highest chance of achieving your dreams!

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.

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.

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.

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.

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.

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.

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.

Is there a reliable way to invest?

March 29, 2021March 29, 2021
by Gregory Fok

Investments and reliability hardly go hand in hand, I used to think. And investments are filled with ups and downs in the markets.

When I first started investing in 2005, I got excited. When I made that 10-20% return, I thought I should sell out before the markets go down. Sometimes I am right, sometimes I am not. And some of the time, that one wrong move will erase all gains made over the past few years.

Well, I had one objective – I needed to plan well for retirement for the long term which will be a few decades down the road. Is there a reliable way to get there especially since it is many years down the road?

My worries

What if I had invested and when I needed the money for retirement, the company I had invested into went out of business or is no longer a relevant business or unable to make the same profits? A few such companies may have been the recent SIA, Hyflux, Blackberry, Kodak etc.

Being able to predict accurately might have been due to skill or even luck at times. But to be able to do it right 100% of the time is almost impossible. Even Warren Buffet does not get it right all the time.

Investing on my own creates anxieties. Whenever I read the papers or look at my portfolio, I am tempted to make a trade. It is either to sell or buy and that creates additional stress for me that very day as I always hope to sell the highest or buy the lowest.

About 5 years ago, I have finally found a more reliable way to achieve my long goals with less emotions, less risk and yet higher expected returns, while building a large CORRE^TM portfolio. If you would like to find out more, you can send me a question.