Bear Market Survival Tips

Bear Market Survival Tips

I was hoping never to write this article because if you are here reading this, it could only means a few things.

  • We are in a bear market
  • You are in a long position with a possibility of being overleveraging
  • You don’t have a system that prepares you for this scenario

Whatever the reason you are here, I think it is quite certain that we are experience a market that is downward cha-cha.

Disclaimer: It is anybody’s guess where the market is going to be. This should not be taken as a buy/sell/hold recommendation. Please consider your own context or approach a financial advisor for advise.

Bear Market Survival Tips
Bear Market Survival Tips

Despite the fear, bear markets are nothing new. To put everyone on the same page, a bear market occurs when major stock indexes like the S&P 500 fall 20% or more from their most recent peak. They’ve occurred 12 times since 1946, which is on average once every 8 years. Most pullbacks above 20% have been associated with recessions. Hence, with the perfect long storm, politicians all over the world are most concerned about recessions.

On average, a bear market is around 9.5months. This would mean most of us will live to tell the tale assuming we are not shaken out of our position (mentally or by margin calls).

As I get more and more about how to invest in a bear market, I hope this article will be able to share with you some bear market survival tips to prepare yourself for the weeks to come.

Bear market survival tips

#1: Avoid making impulsive decisions

This makes the top of the list. Emotionally, people don’t like to be wrong (whether temporary or in the long run). Hence, when they see their portfolio in the red, many people have the temptation to “reset” their portfolio. This is detrimental to your wealth management journey and it is just a “quick fix” of escaping the mental strain.

Stay calm is the key in bear and highly volatile markets. If your time horizon is decades away, the best thing to do is to invest as if nothing has changed. Let me give you an example of a $1000 investment in the S&P 500 between 1/1/2009 and 12/31/2018 (the last market crash).

  • If you stayed invested the entire time, you’d have $2,775.
  • If you missed the 10 best-performing days during that period, your account value would be $1,722.
  • If you missed the 30 best-performing days in this 10-year period, you’d be left with $918.

I can’t emphasize how important it is to stay invested.

#2: Build your positions regularly over time

With dollar-cost-averaging (DCA), no thinking is really required. However, I recognized that it may not be easy. I saw friends who were excited about the recent bear market and have dollar cost average down the last few months.

However, they are all now NOT adding into new positions as the market is still going down. DCA is somewhat easy to say but not easy to execute consistently unless there is a system that is set up. Personally, I have averaged down on the China Market previously and it is still a bleeding position (Check out my latest SRS positions).

Time will tell. That being said, stay tune for my upcoming article: The pros and cons of dollar cost averaging.

#3: Change your strategy, diversify or play defensive

As a wealth manager, I realized risk management is something that I constantly address. If you’re still active in the markets and it is not working anymore, it might be time go passive with a lazy portfolio. If you find yourself taking too much risk, you might want to seek a more defensive portfolio.

Your current life stage might not allow you to take too much risk as compared to before. It is vital to re-assess your situation, your goals, your risk tolerance and discuss with a professional on your options.

#4: Go contrarian (Not recommended)

If you are a trader, you know better than to go against the trend. Consider taking a buy put options position to bet against a stock or ETF, this allows you to have a limited downside (as you are a buyer of the put option) and able to participate in the downward trending market.

WARNING: I have to emphasize that buying options is speculative. They may expire and be worthless if you do not have a game plan. If you are wondering what this is, do not do it. 

Final Thoughts

Stay strong. This may be the pivoting moment in your investment journey. There are so many resources you can turn to nowadays to prepare for a bear market. You can consider what Warren Buffett is doing amidst the noises.

Definitely reach out if you need help. I will be more than happy to have a conversation with you.

Otherwise, please watch out for my next article: The Pros and Cons of Dollar Cost Averaging. [Update: The article is out!]

 

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

Individual Income Tax Season 2022

It is the time of the year again. Last year, I wrote about whether an individual is required to pay taxes and my opinion of effective income tax in Singapore. This year, I will simply comment on the latest happenings and what you should take note of.

Disclaimer: Please refer to IRAS Website whenever in doubt.

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

Year Of Assessment 2022

The filing for YOA2022 have started on 1st March 2022. We will have until 18 April 2022 (*very important date*) to e-File our income taxes.

How To Reduce My Income Taxes Effective Income Tax Rates
How To Reduce My Income Taxes Effective Income Tax Rates (From YA 2017 to YA 2023)

Income tax rates will remain the same until YA2023. Thereafter, there will be changes for people earning > $320,000 as highlighted in the Budget 2022.

This year, it is stated that 7 out of 10 taxpayers in Singapore will not be required to file a tax return as there have been initiatives to simplify tax filings. This includes No-Filing Services (NFS) and Auto-inclusion Schemes. Partnerships whose revenue of up to $200K will only need a 2 line statement as compared to 4 line previously.

It is worth noting that you can make changes to your income or reliefs by making an amendment on the IRAS portal 30 days from date of tax bill. Any excess taxes can be refunded by PayNow.

Final Thoughts

Think about your Netflix subscription and you are buying their library of movies. I consider individual income tax as a subscription that I pay to stay in my country. I’m paying for my safety, the public goods and mainly the comfort to live in Singapore even if the perfect storm is coming.

I like the progressive income taxes system in Singapore but I’m like most of you, it is not fun paying taxes.

I wish you the best in your financial journey. Hope to hear from some of you. I will be arranging for a CPF webinar in the weeks ahead. Please leave a comment below if you wish to be updated on the details of the webinar.

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.

4 Things From Singapore Budget 2022 That Will Affect You and Me

4 Things From Singapore Budget 2022 That Will Affect You and Me

On Feb 18, 2022, Finance Minister Lawrence Wong delivered the Singapore Budget 2022 in Parliament. The topics were broad ranging as it addresses the economy, helping businesses and green initiatives. The focus which I saw was mainly into healthcare, retirement and funding them.

In this article, I will talk about 4 main things from the Singapore Budget 2022 that will affect ordinary people like you and me. In addition, I will talk about the possible impact in a limited context.

4 Things From Singapore Budget 2022 That Will Affect You and Me
4 Things From Singapore Budget 2022 That Will Affect You and Me

#1: GST for You and Me

Singapore will raise Good and Service Tax (GST) from 7% to 9% in 2 stages in 2023 and 2024.

*Groan*

This might be dreadful news for everyone. GST is basically a tax on all goods and service in Singapore. Think of your coffee at Breadtalk, the iPhone you buy from Singtel or the massage at the parlor. We might not “see” GST very often as most shops would have already incorporated GST into their final prices. When GST increase, this will inevitably be passed to consumers like us. It is more important than ever to plan more for our retirement.

Positively thinking, the GST in 2022 is still 7%. If you have any bigger expenditure (Read more: How To Save On Big Ticket Purchases) that you require, you can consider doing so in 2022. These could be things like renovation, buying a laptop etc.

On a side note, this might boost the Singapore economy in 2022.

#2: Vouchers for You and Me

The Assurance Package first announced in 2020 by then Finance Minister Heng Swee Kiat has been topped up to be $6.6B by current Finance Minister Lawrence Wong. The main intention is to help support lower and middle income household in the increase in GST (maintain standard of living) even after the package ends.

Singapore Budget 2022 Assurance Package Vouchers
Singapore Budget 2022 Assurance Package Vouchers

The Straits Times actually did a beautiful summary on the vouchers that could be received. For a more detailed look at how much specially you will be getting, the Ministry of Finance page is the place to go.

I can safely say that the minimum that a Singaporean age 21 and above will get at least $700 from 2023 to 2027.

#3: CPF Retirement for You and Me

CPF Retirement Sums Raised

The first impact on CPF retirement is that our retirement sums will be raised by 3.5% per year for the next 5 cohorts that will be turning 2023 to 2027. There have been no mention if this will be reduced after that. It would be good to note that it was previously increasing at 3% per year.

Singapore Budget 2022 CPF Retirement
Singapore Budget 2022 CPF Retirement

This means that more have to be put inside of CPF so that you will be able to have a higher monthly payout at 65. However, this will also mean that you will likely draw out less at age 55. (Read More: 3 Key Changes To CPF Policies From 2022).

It is also worth noting that 8 out of 10 active CPF members aged 55 in 2027 will be expected to hit their BRS securing a basic level of retirement in any case.

CPF Contribution Rates Raised

The second impact on CPF will be of contribution rates for employers and employees will continue to be increased. The first increase has started from 1 Jan 2022. The next increase will be in 2023. This will also mean that more will go into CPF.

It is worth noting that if a CPF member have already hit the FRS, you will be able to withdraw the excess out as cash. Therefore, increase in contribution rate (by the employer) is generally seen as a good sign.

Singapore Budget 2022 CPF Contribution
Singapore Budget 2022 CPF Contribution

#4: Taxes for You and Me

If you are affected by some of these tax, congratulations! You might be the top 1% income earners in Singapore. In the budget 2022, there will be 3 main taxes namely, income tax, property tax and luxury car taxes.

Income Tax

This change will come in for year of assessment 2024. This means that it will be for income earned between 1 Jan 2023 to 31 Dec 2023. There will be 2 additional upper bands.

For chargeable income from $500K to $1M, it will be taxed at 23%.

For chargeable income from $1M and above, it will be taxed at 24%.

Singapore Budget 2022 Effective Income Taxes
Singapore Budget 2022 Effective Income Taxes

In the grand scheme of things, our effective income taxes are still reasonable as compared to many other countries. I believe this will affect the top 1% of us. (Read More: Income Tax Deductible 2021)

Property Taxes

To understand property taxes, there are 2 concepts that you need to know. One is Annual Value (AV) and the other is whether the owner is staying in the property. As the latter is quite clear, I will explain AV.

AV: Estimated gross annual rent of the property if it were to be rented out.

This number is decided by IRAS and there is nothing much you can really do about it. You can find the AV of your property on the IRAS portal. Looking at the photo below, you can have a rough sense by looking at the AV compared with the type of property.

Singapore Budget 2022 Property Taxes
Singapore Budget 2022 Property Taxes

Property taxes will be raised in 2 phrases namely in 2023 and 2024.

Singapore Budget 2022 Property Tax Non Owner Occupied Rates
Singapore Budget 2022 Property Tax Non Owner Occupied Rates
Singapore Budget 2022 Property Tax Owner Occupied Rates
Singapore Budget 2022 Property Tax Owner Occupied Rates

I believe impact will be felt for Non Owner occupied of AV > $45,000 with tax rates increasing from the current 14% to 28% in 2024. These would most likely be an investment property that are collecting rent.

For Owner occupied of AV > $55,000, the tax rates will increase from the current 4% to 10% in 2024. According to Lawrence Wong, this will affect 7% of owner-occupied residential properties. I believe this will be a combination of landed property owners (5% according to Department of Statistics in 2021) and some condominiums owners in central areas (2% of residential properties owners by subtraction). It will not affect most of us.

This is be seen as a form of wealth tax.

Luxury Car Taxes

An additional registration fee (ARF) tier has been created for cars, taxis and goods-cum-passenger vehicles with open market values (OMV) exceeding $80,000.

This will only affect Porsche Cayenne, Lamborghini Urus and Bentley Continental GT, and it will also affect several other makes such as Ferrari, McLaren, Aston Martin, Rolls-Royce and Mercedes-Maybach as well as top-end models in a number of other brands.

I believe this will not impact most people on the ground.

The top 6 luxury car brands in Singapore sold 216 cars in 2019. If demand remains the same, only a extremely small proportion of people will be affected by this. This is definitely a wealth tax.

Singapore Budget 2022 Car Taxes Bentley Continental GT
Singapore Budget 2022 Car Taxes Bentley Continental GT: Seen any of these around?

Conclusion

The budget comprises more than just the above 4. The 4 points above just show how the Singapore Budget 2022 will directly impact you and me.

I wish you the best in your financial journey. Hope to hear from some of you.

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.

Chinese New Year Hong Bao Rates 2022

Chinese New Year Hong Bao Rates 2022

6 more days and Chinese New Year will begin. Chinese New Year has been muted for 2 years now ever since COVID-19 took us by storm. I believe many lives have been changed especially when it comes to wealth management.

What about Hong Bao rates? Has it really change as compared to pre-COVID-19 season?

Chinese New Year Hong Bao Rates 2022
Chinese New Year Hong Bao Rates 2022

Bearing in the mind the usual rules of not giving in odd numbers or any number ending with $4 (means death in Chinese), I asked my entire Wealthdojo community on how much they will think would be an average hongbao rate to give or receive.

The Most Acceptable HongBao Range for Non-Family Members

I did not poll for family member rates as it depends on your relationship with your family. I expect many factors (both emotional and logical) for you to set the rate.

Getting a hongbao rate for non-family member is simpler and that’s what we aim to find out.

Chinese New Year Hong Bao Rates 2022 Poll
Chinese New Year Hong Bao Rates 2022 Poll

As you can see, the majority of the community felt that $8 to $18 is a fair range of hongbao rate to give or receive. Personally, I believe most people would be giving the $8 for auspicious reasons.

For the 4% who don’t mind giving $38, let’s be friends =)

Jokes aside, there is a new trend for giving hongbao that might be a conversation starter this Chinese New Year.

Chinese New Year E-Hongbao

China is the one that first started the E-Hongbao tradition (I’m not sure if we can call it tradition anymore). The Hongbao that you will be giving or receiving will be in the form of QR code for you to scan. You can even give or receive a personalised Chinese New Year message.

Several banks have started to offer this service. DBS is one bank of the many that is providing this service. It is just a click of the button to create a “virtual hongbao”.

Chinese New Year Hong Bao Rates 2022 DBS eGift
Chinese New Year Hong Bao Rates 2022 DBS eGift

If you still prefer the physical hongbao, you can collect the QR gift card from any DBS/POSB branches.

Chinese New Year Hong Bao Rates 2022 DBS QR Gift Card
Chinese New Year Hong Bao Rates 2022 DBS QR Gift Card

Hopefully, this creates some fun and novelty this Chinese New Year.

Final Thoughts

This is not a sponsored post by DBS. I simply used DBS as an example because it came up top in my Google search. Feel free to use your preferred bank for this service (if they have).

Wishing everyone a Happy Chinese New Year. Look forward to more sharing on personal finance such as CPF in this blog.

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.

3 Key Changes To CPF Policies From 2022

3 Key Changes To CPF Policies From 2022

January is the month where many people are interested in the CPF. I believe this is because we usually set our life / financial / career goals for 2022 at the start of the year. For those of you who have financial goals, I welcome you to Wealthdojo and hope that this website will be a good resource for you.

3 Key Changes To CPF Policies From 2022
3 Key Changes To CPF Policies From 2022

This article will only highlight 3 2022 CPF Policies updates. If you wish to look at all the other changes that was announced in Nov 2021, you can take a look here.

#1: Basic Retirement Sum (BRS) / Full Retirement Sum (FRS) / Enhanced Retirement Sum (ERS) Updates

The CPF retirement sum is a moving target because of inflation. This is to ensure that CPF payouts will be sufficient during our retirement years. For 2022, the amount in BRS, FRS and ERS are $96,000, $192,000 and $288,000 respectively. If you are turning 55 this year, these numbers will be relevant to you.

#2: Basic Healthcare Sum (BHS) Updates

In 2022, the BHS will be $66,000. This is the estimated savings needed for basic healthcare for old age and is adjusted yearly until the age of 65. This will be fixed for the rest of your lives. If you are turning 65 this year, this number will be relevant to you.

#3: Increase in CPF Top Up Tax Reliefs Updates

You may enjoy tax relief of up to $8,000 if you may a top up for yourself and an additional $8,000 if you make a top up for your loved ones. However, the $8,000 tax relief cap is now shared between Special Account (SA), Retirement Account (RA) and the MediSave Account (MA).

This update has posted the most concerns and I believe this will affect a specific group of individuals which I will explain later.

To understand this, we have to take a step back and look at how top ups were done before 2022 especially MA Top-ups.

Before 2022, topping up MA is a popular tax relief option together with Retirement Sum Top-Up (RSTU). It depends on 2 factors.

  • The difference between the CPF Annual Limit ($37,740) and the CPF contributions made for the calendar year
  • The difference between the BHS and current MA balance

I will be illustrating using an example of Mr Goh (age 25) with a salary of $10,000 monthly with no bonus. As he is young, we can safely assume that his MA amount is way below the BHS. As the the Ordinary Wage ceiling is capped at $6,000 currently, his annual CPF contribution will be the following.

A: Annual CPF Limit: $37,740

B: Annual CPF Contribution: $6000*12*0.37= $26,640.

C: Eligible VC-MA Top-up amount: A – B = $11,100

D: Max RSTU Top-up limit before 2022 = $7,000

E: Total Eligible Tax Relief: C + D = $18,100

As you can see, it is slightly more complicated to calculate tax-reliefs previously.

After 2022, it is very simple. $8,000 tax relief cap is now shared between Special Account (SA), Retirement Account (RA) and the MediSave Account (MA). This means for Mr Goh, his eligible tax relief decreased by $10,100 ($18,100 – $8,000).

Now that we understand the theory behind it, let’s put things into context.

Personally, I think this will not affect most of us. This is because the median income for Singaporeans is $4,534 in 2020 including CPF contributions from employers. It is an income where tax is rather manageable (in my opinion) and you might not consider to contribute to CPF for tax purposes. I do understand that some of you might be attracted to the interest rates from CPF, feel free to contribute at your discretion.

The group that I believe will be affected are the high income young individuals. At that income level, you might be looking for ways to have tax-reliefs such as SRS Top-ups to reduce your taxes.

Final Thoughts

The journey of your financial freedom begins with the first step. Congratulations for reaching the end of the article. I hope to see and hear (write down your thoughts in the comments below) from some of you in 2022.

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.