Planning for the future within small-fry limits

Form a savings plan based on when you would hope to have accumulated first serious money


During a property seminar at our auditorium in January, I was awed by the number of fancy sports cars that appeared in our carpark.

When I pointed this out to one visitor, he proclaimed that in Singapore, your average property investor is not your average kucing kurap (small fry) share investor.

Excited by this prospect, I later did some research on how lower net-worth investors like myself could invest in physical property here.

One speaker had mentioned that investing in a private real estate fund was one way to take advantage of developers making bulk sales to avoid Qualifying Certificate penalties for their unsold units.

But it turns out that you need to be an accredited investor to look at most opportunities outside the stock market, even for certain crowdfunding platforms.


Also, real estate crowdfunding more frequently means funding a loan for a developer rather than taking an equity stake in the property. Either way, Singapore is not quite brimming with these opportunities, as the regulator is yet to finalise its position on crowdfunding.

Another thing people used to do was to get a group of three or four friends together to pool money and buy a place.

So I floated this idea to some good buddies - let's form a consortium, buy something and wait for the market to turn. But one of them immediately countered that that does not make sense any more with the ABSD (additional buyer's stamp duty).

Basically, the ABSD makes the cost-benefit analysis non-uniform for each person in the syndicate because it imposes a huge tax liability (7 per cent for Singaporeans) on anyone who subsequently decides to buy a second property.

Which complicates things at this fragile life juncture where most people our age would be getting married and becoming home-owners pretty soon.

While my base case is that property prices will probably start rising again before I get married, I am positive that this would be considered a crisis scenario for some of my girlfriends.

So that idea has been abandoned.

For now, I am content to invest within my small-fry parameters. Share trading remains a good option, as does a focus on personal upgrades like education.

Recently, a colleague shared with me a piece of advice about financial planning: If you are just starting out in your career, you should try to save and plan based on when you expect to accumulate your first serious sum of money - because then you will have enough to build a proper investment portfolio with a proper asset allocation strategy.

That means not having to take concentrated risks in just one or two stocks.

At first, I was skeptical. Diversification is one of the greatest myths, a friend once told me.

Depending on what your area of expertise is, the bets you take within that comfort zone will logically be safer than if you dabbled in a completely different area you had little or no experience in .

In other words, diversification is not diversification if you do not know what you are doing. Stick to what you know instead of investing in things you do not understand.

This is why portfolio managers make so much money.

The other way round the diversification trap, it seems, is to learn a little bit - though ideally not so little - about everything. Starting now.

I do not dare say I have got very far on this project, but let's just say effort has been made.

Coming back to the proposition - to formulate a savings plan based on when you would hope to have accumulated your first serious money.

I do not spend much outside of weekly drinks or meals with my friends and occasional travel. I do not enjoy shopping.

That should give me a good lead compared with my peers, before you control for salary.

But then the other big consideration - as it occurred to me - is that I should think through all the possible drawdowns and shock events that my bank account may have to withstand.

For example, the possibility that I may have to chip in for my youngest sister's university education if the Lee family office encounters financial difficulty, what with my father nearing retirement age in a few years.

Because there are so many "what ifs" when you're projecting yourself into the future, planning can be daunting.

In Singapore, just 55 per cent of people aged between 25 and 35 said they have started actively planning for the future, a survey by NTUC Income last month found.

But fear is no reason to brush off planning.

It is exciting to think about the future, and more exciting when you set goals for yourself to meet. There is also a pride to watching your bank account grow, whatever size the increases.

In my case, it has also made me a more capable adult.

I am not so good at maths, going by my A-level grade, I once confided to a venture capitalist.

He replied: "Don't worry. As your money grows, you will become better at maths. It's correlated."

A version of this article appeared in the print edition of The Sunday Times on March 13, 2016, with the headline 'Planning for the future within small-fry limits'. Print Edition | Subscribe