In my first article of 2016, I would like to make a confession.
We have been so very wrong all this while, and I would like to come clean once and for all. The realization came out of the blue last week. It was both heart wrenching and empowering.
Heart wrenching because I suddenly realise how fundamentally misplaced I have been this past couple of years. I feel like a kid coming of age and suddenly realising that Santa Claus does not actually exist.
On the other hand, it is empowering because being aware and accepting of this new norm allows us to start off on a brand new slate.
Here's our mistakes. Don't do the same.
We asked 14 Singapore finance bloggers to share what they would do if they could go back in time and invest their first $20,000. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.
First, some background.
I started writing for BigFatPurse.com in 2012. Alvin roped me in to share my ideas with the audience. His brief to me was simple – Write anything. Write from the heart.
On the blog, we shared our personal money experiences. There are a good many articles about trading and investing, about properties and insurance and entrepreneurship. Other than ourselves, we have also gotten the man (woman) in the street to step forward to share their stories. I also write quite a fair bit about psychology and the money mindset.
We try to address Singaporean’s money woes. We try to speak the hearts and minds of the man in the street. And at the core of that is the problem of having not enough money.
We aspire to have more. Not only that, here at BigFatPurse, we aspire to help more people have more.
We are proponents of investing in a basket of stocks via an ETF. Alvin wrote a book on the Permanent Portfolio, a low volatility instrument to invest in. We organised talks on how to avoid scams. We interviewed good folks. We run the Value Investing Mastery Course. We even got the biggest financial bloggers in Singapore to sit down at their keyboards to write about how they would invest their first $20k. The free ebook is available here for download.
We thought that by bringing up the level of financial literacy in Singapore, we will be able to help Singaporeans make better money decisions and hence, make more money.
We do all these because we want to help solve Singaporean’s biggest problem – Money Not Enough.
All of a sudden, I have come to realise that everything I have believed about not having enough money is totally untrue.
On the contrary, the biggest problem many Singaporeans face is the exact opposite. It is not about not having enough money. It is about having way too much money!
Before you start pelting eggs and heckling me off the stage, let me explain why.
If we do not have enough money, we will be thinking of how to take on another job to make more. And not about investing – which stock to buy, when to buy and how to allocate the capital efficiently. We would not bat an eyelid when the latest hottest stock tip falls onto our lap from our mother-in-law’s cousin’s uncle. Precisely because we have too much.
If we do not have enough money, we would be worrying about our next meal tomorrow. And not about whether to buy Life or Term insurance and leaving enough for our children in the next decades. Precisely because we have too much.
If we do not have enough money, we would be worrying about the next installment or even the rental on our HDB flat. And not how much of a loan to take and how much to pay down to optimise the interest on the loan, and definitely not about whether we consider our HDB flat an asset or not. Precisely because we have too much.
If we do not have enough money, the last thing we would be doing is reading BigFatPurse. Precisely because we have too much.
The Most Painful Problem
Do not get me wrong. I am neither understating nor undermining the problem at hand. The problem of having too much money is a first world problem. It is very real. It is also very painful.
If you are a retail investor with 20k (or 200k, or 2mil) of hard earned money in the pocket, finding the right use of that money is something that can keep you awake at night.
Should we save it, spend it or invest it?
Saving it is the safest option. Or is it?
Unfortunately as we all would know, the safest place is often the most dangerous. The threat of inflation and the value of money eroding is real. Our money will end up buying lesser and lesser each day. We might be better off spending the money right now. We will be getting more bang for our buck.
Spending it is the happiest option. Or is it?
According to Maslow’s Hierarchy of Needs, Safety forms the base, just above Physiological needs. In ancient times it could mean a solid cave perched high up in the mountainside easily defensible against wild animals and other human enemies. In modern capitalistic society it would mean having unlimited resources (i.e. money) to fall back on. Spending the money makes us happy for a moment, but we might be better off investing the money to make it work harder for us.
Investing and growing our money is the most prudent option. Or is it?
According to statistics from CPF Board, almost 9 out of 10 retail investors lose money. We all know from personal experience that this is indeed the case. Funds underperform. Property prices seem to be going nowhere and with interest rates rising, the market outlook does not look all too rosy.
Investing is dangerous because it is all too easy to blow up the capital with one bad move. What if we were to buy a stock/house/some gold today and the prices were to fall through the floor tomorrow? Perhaps it is better to hang on and wait for just that little bit more? Perhaps we would be better off keeping the money safe in Fixed Deposits.
So then, should we save it, spend it or invest it?
Money Too Much.
No one in the world would admit that they have too much money. Ask anyone and they would say that money is never enough.
I hope by now I have managed to convince you that there are two distinct sets of money pains. The pain of not having enough, and that of having too much and not knowing what to do with it. Between these two sets, I believe that the vast majority, if not every single one of you reading article is plagued by the latter and not the former.
The sooner we come to be aware and accepting of this cardinal rule, the sooner we stop lying to ourselves, the sooner we will be able to make peace with money.
My realisation has allowed me to see that the problem is not about not having enough, but rather about what to do with what we already have. I hope you see it that way too.
Dear BigFatPurse reader.
You are here because you are confused about the financial markets and the baffling products out there. You could be a skeptic, somewhat untrusting of the industry at large.
You are here because you want to find timely information about the financial markets from an unbiased, independent voice.
You are here because you believe that an investment in knowledge pays the best interest. You are here because you are want to take money matters into your own hands.
You are here because you have a problem. A problem of too much money.
Let this be a conversation. Let this be a conversation about having too much money. Let’s get the conversation going!