Category: Singapore

Lessons from Jim O’Shaughnessy

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1/ I have been a professional investor for over 30 years. What follows is some things I think I know and some things I know I don’t know. Let’s start with some things I know I don’t know.

2/I don’t know how the market will perform this year. I don’t know how the market will perform next year. I don’t know if stocks will be higher or lower in five years. Indeed, even though the probabilities favor a positive outcome, I don’t know if stocks will be higher in 10 yrs.

3/I DO know that, according to Forbes, “since 1945…there have been 77 market drops between 5% and 10%…and 27 corrections between 10% and 20%” I know that market corrections are a feature, not a bug, required to get good long-term performance.

4/I do know that during these corrections, there will be a host of “experts” on business TV, blogs, magazines, podcasts and radio warning investors that THIS is the big one. That stocks are heading dramatically lower, and that they should get out now, while they still can.

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Long Term Investment: 3 Reasons Why Is a Bad Investment Strategy

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How often do you hear the advice to do long term investment? They say the smartest thing to do is to buy and hold because the market always come back; stay invested and you will outperform 90% of the fund managers.

Should you believe long term investing?

long-term-investment

Long term investing seems to make sense in the first place. After all, if you want to invest for your retirement, that is for long term right? There are many empirical studies with 20 to 30 years historical data to justify this argument. It says that if you were an average investor and held a basket of index stocks, you are almost certain to make money if you stay invested for long enough.

But the truth is, the traditional way of long term investment is not suitable for most people, and it will almost always cost you a big fortune, especially in today’s market.

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Singapore Median Gross Monthly Income From Work (2006 – 2016)

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Ministry of Manpower (MOM) published a summary table on Singapore Median Gross Monthly Income From Work (Including Employer CPF Contributions) of Full-Time Employed Residents. For the year of 2016, it is at $4,056 including the employer CPF. I will be using the 2016 median income as an example in the spreadsheet, excluding the employer CPF portion ($3,467) because who does that! Imagine people negotiating with HR for a higher salary with X% increment based on their current salary including the previous employer CPF contribution. lol.