SINGAPORE (Dec 28): Record job cuts, online trading scams, and mounting fears among working age Singaporeans of not being able to fund a comfortable retirement. These represent just the tip of the iceberg for Singapore’s economy this year, and the general consensus is that 2017 will not be any better.
While physical fitness and health goals top the New Year resolution lists of many, getting into (and staying in) good financial shape is a whole different ball game altogether.
Even some of the most seasoned investors may have overlooked the importance of cultivating these five basic financial habits from the get-go:
1. Save early and save smart
According to a recent report by HSBC Bank, a degree of Singaporeans suffer from investment “tunnel vision” by expecting to draw on cash savings and property to fund their retirement – without realising the importance of diversification in a savings plan. In fact, 23% of working age Singaporeans surveyed claimed they had not even started saving, while 26% of pre-retirees said they lacked financial advice or information on the subject of retirement.
2. Practise financial self-defence
Things are not looking good for Singapore’s labour market in the near term, with the slowdown in hiring and through-the-roof layoff rates this year. This makes it all the more imperative for just about any gainfully employed individual to always be proactively in the process of building on an emergency fund that is apart from retirement planning. One can never go wrong with the old adage of saving for a rainy day, in other words.
(See also: Singapore sees highest second quarter layoffs since 2009)
(See also: Saving simplified)
3. Keep fees low
For the first 10 months of 2016, at least four closures were seen among Singapore-registered funds. Two problems were common in all the funds; they had low assets under management (AUM) and high total expense ratios (TER). TER is the key cost-efficiency indicator that measures a fund’s annual operating costs as a percentage of its net asset value (NAV). Those operating costs include management, trustee, custodian and administrative fees as well as other recurring expenses.
(See also: How to avoid the next flop of a fund)
4. Spread risks through asset allocation
Based on the positive performance of regional stocks and bonds in Asia’s volatile financial markets of late, having exposure to both Asian equities and bonds has not only rewarded fund investors with stability of returns and regular income – but also with decent capital gains over the past three years. This year, Asian equities and bonds have turned in total gains of nearly 6% in Singapore dollar terms, as measured by the MSCI AC Asia Ex-Japan Index and the JP Morgan Asia Credit Core Index.
(See also: Asia allocation fund bets)
5. Look out for potential pitfalls
If a deal sounds too good to be true, it probably is. One such as example in investing is binary options trading, which is often marketed with promises of high, quick and safe returns but are in fact “speculative and risky”, according to the Singapore police force. Over S$1 million was reportedly lost to unregulated binary options trading platforms, many of which were based outside Singapore. Local investors are encouraged to deal with regulated entities listed under the Monetary Authority of Singapore (MAS) as well as licensed commodity brokers under International Enterprise (IE) Singapore.