Enduring The Correction 2021

Enduring The Correction

Enduring The Correction 2021
Enduring The Correction 2021

The last few days was beginning to spook investors. Global investors are concerned about rising inflation, coupled with raising 10 year Treasury Yield. This send the S&P500 down with growth stocks taking the lead. You might have the same concerns seeing your portfolio dipped. There were many people that reached out to me. Enough of them for me to put out a message in my telegram channel.

Enduring The Correction Advice
Enduring The Correction Advice

For those of you who started investing in March 2020, this might be your first major correction / bear market (if it is coming). If you feel uncomfortable to see losses, rest assured this is very normal. No one likes to lost money.

Instead of sharing logical data of how each correction ends up higher, I have consolidated a few great quotes from investors I respect. In your wealth management journey, investment is both logical and also an emotional experience.

Enjoy the ride. Hope you find strength in these quotes.

 

“Stock prices are not business prices. The company you have invested in will not stop/pause to sell their products just because their share price dropped by a few dollars. Whether there is a correction or not, invest in quality companies/portfolios that continue to grow” – Chengkok, Founder of Wealthdojo.

 

“Unless you buy a stock at the exact bottom (which is next to impossible), you will be down at some point after you make every investment. Your success entirely depends on how dispassionate you are towards short term stock price fluctuations. Behavior matters.” – Joel Greenblatt, American hedge fund manager.

 

“I deleted my (brokerage) app from phone yesterday so (that) I don’t see again and again. I will (continue to) add money every month and wouldn’t sell a share. I have quality in my portfolio and would evaluate things in 2021 Dec whether to sell anything.” – Rajeev, Singapore Investor.

 

“In times like these, the best thing to do is to research companies… and then come away with optimism that “wow… so much growth yet to happen!” – Ser Jing, Portfolio Manager of Compounder Fund.

 

“The principles have not changed. #1 Buy great companies #2 Buy them at fair value.” – Dr Daniel Kao.

 

“Rotation is the lifeblood of any bull market.” – Ralph Acampora, Director of Technical Analysis at Prudential Securities.

 

“Market is just price movement, it is never about the whole business. Where-else the underlying asset which the company that provide the goods and services is the real deal biz to the industry.” – Singapore Investor #2.

 

Final thoughts by Wealthdojo

Once again, I would like to thank all who have contributed to the above quotes. Enjoy the ride.

 

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.

There were only two things certain in life Death and Taxes

How Much Is My Income Taxes [2021 Edition]

It is the tax season for 2021. If you had an income in 2020, filing of your income tax starts 1st March 2021. You will NEED to file it by 18 April 2021 (e-filing) or 15 April 2021 (paper filing). If you don’t, it could lead to a fine or even a court summon. Don’t say you have not been warned.

We don’t really talk about taxes in 6 Levels Wealth Karate Methodology. In a simple gist, taxes are bittersweet to me. On one hand, I don’t like to pay taxes as it is an expenses to me. On the other hand, if I pay higher taxes, it would mean that my income is higher! I’m just glad that in Singapore, we have a really attractive tax program and we pay significantly lesser taxes as compared to people in other countries. Without going too deep into that, here’s how how much to pay for your income taxes in 2021.

 

Do you need to pay taxes or not?

Yes. You only pay income taxes if your chargeable income is greater than $20,000. Some income are chargeable and some are not. Fun fact: your winning from your TOTO/4D is not a chargeable income. Check out the full list here.

If your chargeable income in 2020 is above $20,000, you will be taxed with the progressive income tax system. Singapore follows a progressive income tax system. This means that the higher your income, the more you pay in taxes. The resident tax rates are as follows.

How To Reduce My Income Taxes Resident Tax Rates
How To Reduce My Income Taxes Resident Tax Rates

However, this does not show the effective income taxes for your income. When I first saw this table, I thought that if I earn $80,000, my tax bracket would be 7% or $5,600. This is untrue.

How To Reduce My Income Taxes Effective Income Tax Rates
How To Reduce My Income Taxes Effective Income Tax Rates

If you are earning $80,000, you will be paying $3,350 in taxes which means my effective income tax rates are 4.19%. Personally, I think it is quite fair. With the same $80,000, you would be paying $23,571 or 29.46% effective income taxes in USA.

 

Is it automatic?

If you received a letter/SMS/form that tells you to file your income tax, you will have to log in and file it yourself. This sms below is one that I received from IRAS. Typically, most of my income have already be pre-filed as I’m a self-employed working with AIA.

Income Tax 2021 Filing
Income Tax 2021 Filing

 

If you received a letter/SMS/form that tells you NOT to file your income tax, you don’t have to do it. But please verify if your information is correct and accurate.

If you didn’t receive anything from IRAS, you will still need to file a tax return if your:

  • annual net business income exceeded $6,000, OR
  • annual income (inclusive of rental income) was more than $22,000 last year

 

Tax Deductibles

Since 2020 is over, you can’t really do much changes into your deductibles. You can start planning for 2021 instead. In Singapore, we have a list of deductibles given to encourage social and economic objectives such as filial piety, family formation and the advancement of skills.

Income – Deductibles = Chargeable Income

As mentioned above, you will pay taxes on your chargeable income. This means that deductibles will play a big role in the taxes you are paying.

IRAS has created a personal income relief checker to see how much deductible you are allowed. These deductible includes SRS Top Ups, CPF cash Top Ups, just to mention a few. There is a maximum of $80,000 tax reliefs.

 

Final thoughts by Wealthdojo

There were only two things certain in life Death and Taxes
There were only two things certain in life Death and Taxes

Co-incidentally, these two can be well managed by proper financial planning or using insurance tools to achieve your financial goals. This article is meant to be a general article on how to pay taxes in Singapore. If you would like to know more, just comment on this post or contact me and I would love to have a conversation with you on the above.

Stay healthy. Stay Safe and pay your taxes.

Thank you for your contribution to nation building.

 

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.

What To Do With Your Children's Hong Bao Money

What To Do With Your Children’s Hong Bao Money?

Happy Lunar New Year! Wishing everyone here good health and may your wealth multiply in the years to come. Hopefully, the last 4 days have been one where you have been giving/receiving or your child has been receiving hongbao. One common question that I go from parents with regards to financial planning is what they should do with the money. Most of them are keeping it for their children as emergency funds. This is a good initiative. That being said, is this an opportunity to share money lessons with your children?

What To Do With Your Children's Hong Bao Money
What To Do With Your Children’s Hong Bao Money (Source)

 

Your intention sets the tone

What do you want your child to learn from receiving the hongbao? Is it gratitude? Is it charity? Is it spending? Is it emergency funds? Your intention sets your child’s tone. By default, people will stick to the easiest thing of all: Not doing anything. This is precisely why most parents are keeping their children’s money as emergency funds. (PS: I’m not saying that emergency funds is a bad thing. It is also important.)

However, as the child do not have much ownership of the funds, they do not really learn from that concept. To them, it is their parents are keeping their money for them.

So what can you do this year to inspire your children to take charge of their money. This may or may not be applicable and felt by you depending on your relationship with money. Here are some suggestions.

 

Happiness of Spending Money

Wait a minute. A finance blog asking me to spend money? Yes. It came to my attention that “saving money” or “spending money” has became such a pain for people. As our education on money commonly involves parents screaming at us to save money (or that they don’t have money), it has become very hard for some people to spend mentality. Each time you spend, you will feel a pinch when you see your bank balance drop. That’s commonly known as the poverty or scarcity mindset. Eventually, you might grow up with enough money in your bank but feeling miserable that you don’t have enough.

What To Do With Your Children's Hong Bao Money Spend It
What To Do With Your Children’s Hong Bao Money Spend It

As parents, one of the best thing you can do for them is let them buy something that they have already wanted for a long time. Take 20%, $30 or whatever amount (be reasonable) in their hongbao money and bring them to the shopping center. Let them buy whatever they want. Let them feel the happiness of what money can buy. You will be surprised that some children will buy books, stationaries and of course toys. You can take this chance to introduce to them the 4 Quadrants Shopping Guide.

Let them take charge of their finances, the earlier they do, the more responsible they will become.

 

Delayed Gratification

To balance it up with spending, delayed gratification is next. A simple game you can play with your children is called The Marshmallow Test. I won’t explain too much here. Wait this hilarious video on how children wrestle with waiting to eat a marshmallow in hopes of a bigger prize (more marshmallows).

In finance, the timeline would be longer than this test. The intention is to get the children to save their hongbao money for a longer period of time so that they can get back more at a certain age. This could be done by a simple endowment plan or just Singapore Government Bonds that matures after a set period. When they receive the money after xx years, you can calculate with them (do it with them) how much they have put in and compare it to how much they have received. This can be done with your financial advisor.

 

Investing Lessons

This opens up many lessons for young children. You can share with them about volatility, about index (example if you invests in a Country ETF), about companies (example: when apple makes money, you “make” money too), about value or about growth.

One of the easiest way is to invest in companies that they already know. For illustration, my example will be SBS Transits.

Disclaimer: Not a buy/sell recommendation here.

For children, they probably will be familiar with certain products such as the IPhone, Bus services, Netflix etc. When you invest their money (they can only open a brokerage account when they are 18) for them, they get to see if their money grows in terms of capital appreciation or dividends. You can consider investing for them once a year as a dollar cost averaging approach for them to build up their portfolio.

For those of you would like to have something simpler, consider investing into country ETF like the STI Index, China ETF or S&P500. When the particular country does well, they are able to see the value of their investment grow as well. Similarly, do consider a dollar cost averaging approach for your children and invite them to ask questions. This is a great opportunity to for your children to learn about investing either with yourself or your trusted financial advisor.

What To Do With Your Children's Hong Bao Money Investing
What To Do With Your Children’s Hong Bao Money Investing (Source)

Final thoughts by Wealthdojo

I cannot imagine how much of a head start your children will have if they start learn these money lessons as some adults take decades to learn these. Let me know what you guys think in the comments below.

We wish you a Happy Lunar New Year!

 

 

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.

Should You Invest Your Emergency Funds

Should You Invest Your Emergency Funds?

Interest rate in the bank is at the all time low. The time where you are able to get 2% per annum in high interest account is over. With the market at all time high, one question I get is if you should invest your emergency funds?

Should You Invest Your Emergency Funds
Should You Invest Your Emergency Funds

“The interest in the bank is so low. I should use the power of compounding and invest in the stock market”.

This is the current narration in Singapore right now and I don’t blame them. Most of us are literally looking at our money stagnant. If you are like me, you might feel frustrations keeping the money in the banks which is “not doing anything”. Here is a quick introduction of compound interest.

 

Compound Interest

Let’s assume that we have $50,000 that we are keeping as emergency funds. We will be using the following numbers for our illustration.

The S&P500 10 years historical returns: 13.6%

The STI 10 years historical returns: 1.97%

Current OCBC Account EIR (Salary Only): 0.7%

Should You Invest Your Emergency Funds Comparison
Should You Invest Your Emergency Funds Comparison

As you can see on the above future value formulation, the difference is simply ridiculous on a 30 years time horizon. If you have invested the $50,000 in the S&P500, you would have gotten $2.29 million (think about that for a moment). If you invested in the STI, you would have got $89K and if you just leave it in your multiplier account, you would have gotten $61K.

How is it not tempting to invest your emergency funds?

 

So why not invest and keep it as cash?

In life there are many what ifs, that’s the reason why you buy insurance in the first place. By having an emergency fund, you are preventing your life from being a roller-coaster. There are certain things that are unpredictable and could affect your family drastically.

If you desperately need cash then and if the market is NOT in your favor. That would mean that you will need to take a loss without giving it time to bounce back. Ask yourself, do you want to sell at an unfavorable time?

Should You Invest Your Emergency Funds and Sell Here
Should You Invest Your Emergency Funds and Sell Here

Some reasons to have emergency funds are job loss, medical emergencies (especially with the changes in the hospital plans: Co-payments), your family member’s medical emergencies, car repairs or home repairs.

“You will never know when you need the money”

 

Your emergency fund is not designed to be a wealth builder

Not everything is designed to be a wealth builder. Sometimes you need the liquidity as a “personal insurance policy” for yourself and your family. I know some that uses credit cards (which might be suitable credit card for emergency) to design their emergency funds, but that’s another topic all together.

 

Final Thoughts By Wealthdojo

Your emergency fund is not designed to be a wealth builder. For those that wish to read about how I spend my money, you can read one of my best article: The Ultimate 4 Quadrants Shopping Guide Especially If You Are 28 and Older.

Till next time!

 

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.

Open Electric Market Singapore

2021 Open Market Electricity Cost Saving Guide

In April 2018, Singapore decided to open up the electric market to allow retailers to provide electricity to households. There are cost savings yet the adoption rate wasn’t very high. In June 2019, around 34% of household consumers have made the switch. In Oct 2020, 48 per cent of all households have switched to a retailer. This means that there is still >50% of household that have not made the switch.

If news of this haven’t reached you, let this year be a cost saving one for you.

Open Electric Market Singapore
Open Electric Market Singapore

 

Some Background

Since 2001, the Energy Market Authority (EMA) has been opening up the retail electricity market to competition. This is to increase competitiveness and also give more choices to consumers. It is for you to choose what make sense for you.

 

Some Assurance

There are some rumors out there which I would like to put to rest (especially for point 3). Changing to a retailer doesn’t mean that your electricity will be “unstable“. SP Group will continue to deliver to you.

  1. It is not compulsory to switch (No one is forcing you but I will explain why it might be better)
  2. There is no deadline (You can take as long as you want to consider. But please don’t do that)
  3. Regardless of who you buy your electricity from, your electricity supply will stay the same. This is because SP Group will continue to operate the national power grid and deliver electricity to everyone.
  4. If you are eligible for U-Save rebates, you will still be able to use them to offset your electricity bill after switching to a retailer.

 

What can I choose from?

To make it simple, there is only ONE website for you to go to. Everything ranging from price comparison (I know you are looking for this) to the retailers profile can be found here.

Open Electricity Market 

Step #1: Find your Average Monthly Consumption

To see what is best suitable for you, just find out what is your Average Monthly Consumption (in kilowatt-hours, kWh) from your current SP bills. I will be using 300 kWh for illustration purposes.

Step #2: Choose between Fixed Rate VS Discount Off the Regulated Tariff

Choosing this is akin to choosing between Sim Only VS Contract Mobile plans, there is no right answer except which system you prefer.

OEM Fixed Rate
OEM Fixed Rate

Fixed rate is rather simple to understand. You would be paying the same rate for the next XXX years no matter how much the regulated tariff were to change. If you are someone who likes the consistency of bills, this might be suitable for you. There will be times you are paying higher than the regulated tariff but there will be times you are paying lesser than the regulated tariff.

OEM Discount Off Tarrifs
OEM Discount Off Tariffs

Discount off tariff just means a simple percentage discount off the current regulated tariff at that moment of time. A key risk to this is simply when the regulated tariff keeps increasing, your bills will be increasing as well. Looking at the trend of tariff, it seems to be coming down. As 95% of Singapore’s electricity is produced from natural gas, I leave it up to you to think of the future trend of the tariff.

Regulated Tariff
Regulated Tariff

 

Step #3: Select Your Duration

Plans comes in 6 months, 12 months, 24 months. For those that are planning/considering to sell your houses in the next few months, I would suggest the shorter period. For those that will be staying for a while, especially those who are servicing your MOP (minimum occupancy period), you can consider the longer term period.

Like step #2, there is really no “correct” answer to this except which makes sense to you at this period of time.

 

Step #4: Select The Retailer

By now, you would have the retailer. For pure illustration sake (using 300kWh), you can see that there will be cost saving either from the Fixed price plan (~20% discount) or the Discount Off Tariff (23.6% discount). I estimate a cost saving of $400 for 2 years which is around the price of 2 Omakase Dinner with a partner.

Open Electricity Market Comparison

Open Electricity Market Comparison

Final Thoughts By Wealthdojo

Start your 2021 right, some cost savings will go a long way. For those that wish to read about how I spend my money, you can read one of my best article: The Ultimate 4 Quadrants Shopping Guide Especially If You Are 28 and Older, and how to save money on big ticket purchases

Till next time!

 

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.