Biggest Crash In History By Rich Dad

Greatest Crash In History? By Rich Dad

by with No Comment General EconomyInvestment AccumulationMoney Mindset
Biggest Crash In History By Rich Dad
Biggest Crash In History By Rich Dad

You probably would have known him. Robert Kiyosaki is famously known for being the author of “Rich Dad, Poor Dad”. My friends and I religiously read his books and I felt that it was a good place to start off with for financial literacy.

The concepts he came up with was simple, easy and gamified. You might have played his Cashflow 101 game in your pursuit of earning knowledge.

This time round, he has gained media attention again for crying the the market will be crashed in October 2021.

A disclaimer as usual. This is by no means a recommendation to buy or sell any securities or financial assets.

His Predictions For October 2021

His thesis: The Evergrande looming default will spread it’s way to the USA market. Debt positions in the US is worsening. Therefore, he feels like it will be good to buy gold, silver and bitcoin but later changed it to keep some in cash.

The above is a possible interpretation from his twitter.

Robert’s Track Record

If you read his books, you will get an idea that Robert is a big fan of debt. He used debt to create huge amount of passive income by purchasing properties.

He also believes that fiat money is worth lesser and lesser due to the extensively QE. As a result, savers are being punished and that hyperinflation will come in future. He is a big believer in Gold because there is value in Gold and have recently talked more about cryptocurrencies.

The very first time (in my memory) when he talked about market crash was in 2015. He believes that a huge market crash will happen in 2016. Of course, it didn’t really happen.

In 2018, he believes that market is going to get a lot worse and we are heading into bear territory. This was the period of time when the FED was raising interest rates.

In 2020, he believes that COVID19 was the final catalyst for the market to move away from traditional assets like stocks and bonds. However, market has already crashed at the time so there wasn’t any prediction for this.

In 2021, he believes that the market will truly crash in Oct 2021.

It is also no secret that he has been talking about investing into Gold, Sliver and Bitcoin.

Biggest Crash In History By Rich Dad Tweet Gold Sliver Bitcoin
Biggest Crash In History By Rich Dad Tweet Gold Sliver Bitcoin

What I Think About His Predictions

Next year, I will be celebrating my 10th year in the financial industry. I read extensively, upgraded my knowledge and here’s what I think about his predictions.

While there is nothing wrong about having a prediction, I personally feel that Robert has a deep sense of distrust in the financial system and he is extremely bearish in nature.

I don’t know whether he is right about this prediction and I’m in no position to say so. However, his money script (more on this in the articles in future) caused him to react very negatively to money. His focus is on money being money. He will be right if people start to question the existence of fiat money and stop using fiat money altogether. As a results, gold silver and bitcoin may become storage of value then. It is a long shot but who knows.

Over the last 5 years, Gold has been doing relatively okay. If he have bought it 5 years ago (as he said he did), Gold would roughly 38% up or around 6% CAGR depending on his entry.

Biggest Crash In History By Rich Dad Gold Prices Trend
Biggest Crash In History By Rich Dad Gold Prices Trend

Final Thoughts

Personally, I’m invested in the long run. In investment, there will be volatility and it is something we have be comfortable with either through education, experience or both. Are you looking to learn about investment?

What do you feel about Robert Kiyosaki’s prediction? Let me know in the comments below.

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

Why Dollar Cost Averaging is Not Working On China's Stocks

Why Dollar Cost Averaging is Not Working On China’s Stocks?

by with One Comment General EconomyInvestment AccumulationMoney Mindset
Why Dollar Cost Averaging is Not Working On China's Stocks
Why Dollar Cost Averaging is Not Working On China’s Stocks… yet.

The last 2 weeks was a bumpy one for China’s stocks. Technology companies ranging from Alibaba, Tencent, Didi and all the way to the educational sector pretty much spooked investors all over the world. There was massive selling and it seemed to have paused after JD reported good earnings.

Some of these company’s valuation are getting attractive once again as prices corrected in the last 2 weeks. This wasn’t music to the ears for those that are already invested. On the ground, I heard of many investors who took this opportunity to average down (buying at lower prices to lower the average prices). However, some investors seemed to have cracked under pressure and started asking why dollar cost averaging is not working.

Today, this article seeks to explain why dollar cost averaging is not working on China’s stocks… yet.

What is Dollar Cost Averaging (DCA)?

You probably have heard of this term Dollar Cost Averaging (DCA) from a friendly Financial Services Consultant as he was talking about investment. This strategy was made popular to retail investors as a way to invest by reducing the impact on volatility (the ups and downs) in the stock market.

“Time in the market, not timing the market”. This quote always serves as a reminder that investing (not speculation) is about being in the market and not timing the market. (Read More: Why Buy Low And Sell High Is Useless Advice).

Dollar Cost Averaging
Dollar Cost Averaging (Source)

The power of dollar cost averaging is making volatility your friend by buying at regular intervals. It is your objective to own as many shares as possible. In the above example, you are invest $1000 for 6 months.

Month #1: Share Price $10. You will be able to buy 100 shares ($1000/10 = 100)

Month #2: Share Price $13. You will be able to buy 77 shares now ($1000/13 ≈ 77). You have 177 (100+77) shares now. The total capital is $2000. The total value of your shares $2301 (177*$13). At this moment, you are profiting $301.

Month #3: Share Price $6. You will be able to buy 167 shares now ($1000/6 ≈ 167). You have 344 (100+77+167) shares now. The total capital is $3000. The total value of your shares $2064 (344*$6).  At this moment, you are losing $939. Most people starts to open their warchest now.

Month #4: Share Price $10.98. You will be able to buy 91 shares now ($1000/10.98 ≈ 91). You have 435 (100+77+167+91) shares now. The total capital is $4000. The total value of your shares $4776.30 (435*$10.98). At this moment, you are profiting $776.30 again. You are happy again.

Month #5: Share Price $7. You will be able to buy 143 shares ($1000/7≈143). You have 578 (100+77+167+91+143) shares now. The total capital is $5000. The total value of your shares $4046 (578*7). At this moment, you are losing $954 again. Some people start to freak out and wonder why dollar cost averaging is not working. In the case of China, the chart has been one direction downwards and “the moment” in the time for losses are prolonged.

This is the reason why people feel that dollar cost averaging is not working… yet.

Month #6: Share Price $10. You buy 100 shares. In total, you would have 678 shares. Total capital $6000. The total value of your shares $6780. You are profiting again.

You are making volatility your friend

Dollar cost averaging works when there are ups and downs. Currently, as the Chinese market is down, you will feel that it is not working. When the market recovers, DCA will suddenly “work again”. At this point, you will often hear people start talking about their investment gains.

“Time in the market, not timing the market”. 

I had to copy the quote again. Remember that investing (not speculation) is about buying shares of the companies/funds/assets you want through time. Dollar Cost Averaging is just one way that you can consider to invest.

Final Thoughts

You are not alone in this journey. I believe that there are many who have invested in the Chinese market because of good valuation. Of course, there will be non believers of Chinese market because of their tight regulations. At the end of the day, it is about investing with the strategy that you are most comfortable with.

You can buy stock tips. But you can never buy conviction.

Ask yourself if the asset allocation strategy fits your profile. Engage a professional to finetune the strategy. Lastly, do start. With every crisis, comes an opportunity.

With every crisis comes an opportunity
With every crisis comes an opportunity

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

Purge Your Money Burdens

Purge Your Money Burdens

by with No Comment General EconomyMoney ManagementMoney Mindset

As I’m writing this, I am clearing out some old books from my cupboard. I looked at some of them and wondered how it managed to be on my shelves for so long. Some of the books have long served their purposes and probably could do with a new owner.

As I look at the tidier shelves, I struck me that my “financial journey cupboard” was cluttered years back. It was only months later that I realised that some of those things should have been removed.

Purge Your Money Burdens
Purge Your Money Burdens (Photo: Source)

Our worries and burden comes from things that are cluttered. Think about the last time you had a tough day a work, it might be because of “things are not moving”, “stuff piling up” or “too many things to do at one time” You have a clutter problem. Just like finances, things might have piled up before you could have realise it.

If you are feeling stuck in your financial journey, this article might help you purge the money burdens.

First: List Out Everything

This is the heavy lifting that most financial services consultants will do to help you declutter. Here is a list of things that you have to find before we can purge your burdens

  1. List out all your incomes sources (last 3 months)
  2. Print out your credit card statements (last 3 months)
  3. List out all your insurance coverage
  4. Your latest loan amount
  5. Your latest assets amount

In a nutshell, you can see that you are listing our your assets, liabilities, income and expenditure. This is allow you to have a clearer picture of your networth and also cashflow.

Second: Purge

You might have discovered that you might have some income or expenditure that you should purge. Let me help you list out some of the most purgeable items.

  1. Subscription that are recurring are usually forgotten. They might be your Netflix account, your Spotify account or Seeking Alpha assess. Purge out those that you have not used for the last 3 months but are still paying for it. If you have not use it for the last 3 months, you probably won’t be using it for the next 3.
  2. Purge out income sources that are not efficient. You might be doing a little of everything (mystery shopping, survey, Network Marketing, Fiverr, Grab). Potentially, you might have became too tired by spreading yourself too thin. Focus on one and let it grow.
  3. Is there an extra insurance coverage that you have bought years ago? Is there a loan that you can paydown or refinance? Re-analyze your assets and liabilities and purge those that should be gone.

Third: Recreate

Your financial journey is not only about clearing. It is also about recreating. It is only with a clearer lens that you will be able to organise and add for the future.

  1. Is your insurance serving you well at your current life stage? If not, what can you do about it?
  2. What kind of assets can I focus on based on my risk appetite? Should you top up your SRS? Should you contribute more to your CPF?
  3. How can I enhance my income? Is it adding about new skillset?

Move forward. If you are stuck again, don’t be afraid to do another purging exercise until you are satisfied.

 

Final Thoughts

To those that might be thinking the more the better (especially when it comes to income sources). This exercise helped me a lot during a time I was overstretching. I discovered I had 12 income sources and I was spreading myself extremely thin. I couldn’t focus on all 12 and eventually didn’t do well in all 12. It was really painful experience. I had then purge 9 of them and focusing on 3 right now.

Hope that you will have a better financial journey than I do. Till then, stay safe!

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

We are forced to be investors whether we like it or not

We are “forced” to be investors whether we like it or not

by with 2 Comments General EconomyInsuranceInvestment AccumulationMoney Mindset
We are forced to be investors whether we like it or not Low Interest Rate
We are forced to be investors whether we like it or not: Low Interest Rate Singapore 25 Years

This one chart explains it all. It was just a “few years” back when my parents told me that it is important to save money in the bank. Saving money in the bank does have many tangible benefits. Firstly, it creates a pool of emergency funds for a peace of mind. Secondly, it gives you a lump of money to prepare for any opportunities. Thirdly, if you don’t do anything, the banks will give you up to 7% interest per annum (Dec 1980). That sounds good to me!

Fast forward to 2021, the bank is giving on average around 0.05% and it seems to be getting lower. The low interest rate environment has changed many areas of finance. Firstly, it has already affected the insurance companies’ participating plans. Secondly and more importantly, it has lead to the erosion of money.

This means that the money you have now, will be worth less in future. For every $10,000 you have in your bank, the real value of your $10,000 will be halved ~$5,454.84 in 30 years if you continue to keep money in bank. (assuming 2% inflation rate)

You can say that we are in a generation that is “forced” to invest or suffer the erosion of money value with time.

We are forced to be investors whether we like it or not Value Erosion

What It Means For You?

Whether you are in your 20s who might be working for the next 40 years (damn) or in your 50s who might be retiring for the next 30 years, we are all exposed to the same erosion. As a retiree, it is important to understand that your savings value will go down in quantity and value. As a working adult, it is important to understand that your hard earned money is worth less down the road.

There is only one obvious thing to do. Either you keep pace with inflation (endowment plans/selected bond funds/etc does a decent job for this) or you have beat inflation. If you want to beat inflation, you will most possibly be expose to other asset classes which might have higher volatility and risk. It is crucial to know your risk profile here before you proceed.  You might be not suitable for certain asset classes and it is important to talk to professional to assess this.

The Chase For Higher Yield

There are only 2 ways to do this. Either you do it yourself or let others do it for you.

Do it yourself: This is an active role. It involves many things such as knowing what asset classes to buy, what assets in the asset classes to choose from, the pros and cons associated into each assets, the co-relationship between each assets, the duration of investment, the investment thesis and when to exit. This list is not exhaustive.

There is a very strong emphasis here on the level of financial knowledge which might take years to acquire. (All this time, still spending most of your waking hour working on the job). It is a longer process but definitely rewardable.

Do it for you: This is a semi passive role. There is still a personal responsibility to know what you are investing in. Otherwise, you are completely at mercy of the provider. In Do It For You, usually a portfolio is readily available. There will be an explanation on the investment thesis and if you subscribe to the investment thesis, you can consider taking up the Do It For You.

Annual reviews or semi-annual reviews are important here to see how the investment is doing. Generally, it is a passive role after that.

 

Final Thoughts

Whether you choose to do it yourself or do it for you, the reality is that you have to do something. If you don’t, the retirement journey just might be a little hard.

We are forced to be investors whether we like it or not
We are forced to be investors whether we like it or not

Till then, take care!

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

Participating Funds Singapore Moving Forward

Participating Funds Singapore Moving Forward

by with 4 Comments General EconomyInsuranceInvestment Accumulation

Insurance companies will be showing lowered illustrated rates after 1st July 2021. Although there is no real impact because the rates are illustrated after all, you might be wondering why is this happening? I think the most important question that you have will be this.

“Will this affect my returns in the years to come?”

Participating Funds Insurance Singapore 2020
Participating Funds Insurance Singapore 2020. Source: Business Times.

 

What is a Participating Fund?

To understand your returns better, you first need to understand what is a participating fund. You can take a look at LIA: Guide to Participating Fund. I will be summarizing some of the points in the guide.

Participating policies (such as endowment, life, retirement) are life insurance policies which provide both guaranteed and non-guaranteed benefits. The aim of a participating policy is to provide stable medium to long-term returns through the combination of guaranteed benefits and non-guaranteed bonuses. Participating funds can invest in a range of assets, including equities, in search of potentially higher returns.

This means that the participating fund need not be conservative. Equity positions in the 5 companies (as shown above) is around 30% of the entire fund. However, we need to note that insurer need to provide a guaranteed benefits.

 

The Search For Guaranteed Benefits

To back the guaranteed returns of participating policies, insurers typically invest around 70% with bonds (Side note: investing in bonds does not mean that having guaranteed returns). In the persistent low interest environment (plus the RBC2), it becomes an problem for insurers. I believe (this is my guess) that insurance companies might offer newer plans with lower guaranteed benefits in future.

Participating Funds Singapore Moving Forward
Participating Funds Singapore Moving Forward

 

Will It Affect My Overall Returns

That being said, I believe the overall returns for participating funds will improve. This is because insurers has already shown trends to shift more of the assets into equity (read my last article on the data).

However, this would mean that we need to be understand returns on a participating policy may also be volatile in future.

 

Final Thoughts

I do not think that having a lower guaranteed benefit is necessarily bad. This is because when the participating policy has a lower guaranteed benefit, it means it only needs a lower proportion of assets goes into bonds. This will free up some capital to invest in other assets such as equity. This investment mix might provide greater potential/returns for long term investment.

As mentioned above, we need to be understand returns on a participating policy may also be volatile in future. You should be instead focus on your financial needs and whether these plans (participating or not) can serve you in your financial planning.

 

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

Technical Mambo Jambo: RBC2

This section is only for those that are interested in the technical stuff.

Insurer are required to adopt RBC2 from March 2020. Monetary Authority of Singapore (MAS) expects the guaranteed cash flows from assets invested by the Par Fund to match the guaranteed insurance liabilities, i.e. the guaranteed benefits of the par policies. Insurers are required to hold higher capital requirements if that is not the case.

As we are in a persistent low interest environment, it would mean that the insurer have to hold even more bond positions to match the guaranteed benefits. Thus, reducing their ability to invest in the equity market. Thus, potentially reducing overall returns.

As a result, we might see new participating policies with lower guaranteed benefits. As explained above, it may be a good thing and a blessing in disguise.

Here is a 1 hour video to explain the mambo jumbo.