Tag Archives: Finance

How Safe Is Your Cyber?

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The need for cyber security has become paramount in today’s modern age, particularly in the fintech and financial space. Being in this industry myself, I handle sensitive client data daily, and have access to their online wealth accounts; it is therefore vital that their information stays safe and inaccessible to fraudsters. Robust security measures must be in place, and I am constantly having to upgrade and refresh my skills to keep my clients safe.

Whilst fintech has allowed for financial services to become more streamlined, convenient, and efficient, it has somewhat opened the floodgates for cyber-attacks and threats. Harvard Business Review reported a 20% increase in data breaches from 2022 to 2023, and this is set to increase further as the years progress. Not only does this mean we have to constantly upgrade our software and infrastructure, but human area can become a massive opportunity for cyber criminals. I truly believe that a two-pronged approach of new regulatory processes, along with using AI in cybersecurity is a dynamic tactic to tackle this ever-evolving problem.

Cyber security is now seeing the same level of regulation as every other type of security, which means that fintech companies in particular must adhere to stringent rules and procedures. Regulations such as the General Data Protection Regulation (GDPR) and the Payment Card Industry Data Security Standard (PCI DSS) must be followed. Whilst of course this is best practice to ensure that clients’ data is safe, it therefore adds an extra strain onto the company and its employees; this may lead to delayed admin processes, longer lead time for new business submission and therefore, a time delay in profit for the company. Time is money, and the longer it takes for profit to be made, it essentially means smaller margins for the company.

One way this can be tackled is with Artificial Intelligence. Whilst using manpower takes time and money (not to mention the risk of human error), AI systems can scan masses of data sets, analyse data, spot anomalies, and therefore detect possible cyber risks before they have even happened. This preventative method ensures that risks are managed efficiently, and before they become breaches, which means a safer system for the clients, and mitigates possible reputation risk for the company.

However, AI is not a final solution; with cybercriminals’ techniques ever evolving, it means that AI will have to do the same. Not only that, employees must keep re-training when new systems are introduced, to ensure that human error is kept to a minimum. Moreover, one must ensure that the third-party companies engaged to deliver this AI system, is also compliant, safe, and follows the stringent regulations set in place for fintech companies to adhere to.

But the buck doesn’t just stop with the company- clients and customers must also stay vigilant so that they don’t fall victim to cyber-crime. For example, being able to spot a phishing email, not clicking on unknown links, and not giving out all your banking details to someone over the phone. In order for an individual to be savvy, particularly when it comes to fintech and online financial transactions, they must be aware of risks and know when and where it is appropriate to give out their financial information. If you engage a professional for your financial planning, of course you will have to make them aware of your personal details and possibly even bank details. But do take note that they should be encrypting or password-protecting any sensitive documents that are being sent to you.

Even if you are planning your finances alone, and are using platforms for your investing, be sure to do your own due diligence; ensure that the apps you are using are regulated and have secure payment systems. Do take note that most will require you to upload some form of identification, as well as declaring your tax residency. Whilst to a layman, this may seem intrusive, this is actually a sign that the platform is doing its part to adhere to compliance and regulations. If they don’t ask of these from you, it could be a sign that the platform is not regulated.

For those that plan their investing and finances alone, cybersecurity becomes an even bigger risk, as this is normally something that a large corporation would have to ensure the safety of first, but now it is being left to the individual investor. If you are considering planning your finances yourself, having basic understanding and knowledge is incredibly important. Therefore, I often suggest that people understand four main areas before they start investing, which I will explore further in this article.

Finance 101

I have many clients and connections that I come across asking me for advice on how to get their finances in order. ‘How can we maximise what we have now, so that we can make the most of our money later?’. Of course, one of the best passive things we can do, is to invest.

  Investing is the concept of allocating assets, usually money, into different financial vehicles to create a profit. The bare minimum investment should be doing is beating inflation, because over time our hard-earned money is worth less, due to the rising cost of products. Before one starts investing, it is best to have a clear strategy, and get the basics covered first. Here are a few key financial areas you should have planned for:

  1. Build an Emergency Fund

At a glance investing may seem like an obvious choice when it comes to saving money. Why not just throw all your savings into investment if it means high returns? The answer is that investment returns are NOT guaranteed- even the safest investments come with some risk, and sometimes the lock in periods are high, or the penalty for withdrawing early is expensive. To ensure that you are not over-investing, make sure that you have an emergency savings fund that is easily accessible. That way should an emergency arise (like a large hospital bill or having to pay for car repairs), you can use your emergency money instead of jeopardising your investments.

  The recommended amount you should have in your emergency fund is 3-6 months of your monthly salary. This should be a healthy buffer should the worst happen. If you already have more than that, then that’s a great time to consider investing.

2. Know How to Budget

Of course, setting aside for investment would be impossible if you didn’t know how much to set aside. That’s why organising your budget is a crucial step in your financial planning. There are many ways and methods for planning, but a good starting point would be the 50/20/30 rule:

  • 50% of your monthly salary maximum should go on things you need to pay for: housing, bills, groceries & insurance.
  • 30% can go on doing the things you enjoy: hobbies, drinks and travel.
  • 20% should go into your savings: think about your long term savings and investment goals.

If you have surplus each month, you can even consider increasing this 20% to a higher proportion, and allocate more into your investment goals.

3. Be Debt-Free

Before you do any investing, you should really consider paying off your debt. Having a credit card bill is fine, but having any large or bad debt will hinder you in your long-term goals. It seems counter-productive attempting to make lots of money with investments, whilst paying off lots of debt. It may be difficult paying off student debt or large loans, but you will reap the benefits in the long run when your debt isn’t eating into your assets.

4. Set Your Investment Goals

This is arguably the most important step, defining your goals. What is the reason for investing? If you are doing it out of pure greed, then your judgment will become clouded when it comes to riskier investments and you risk losing it all. So have a long and hard think about why you want to invest. You are putting your money, that you worked hard for, somewhere that could give you high returns, or give you nothing. Therefore, it’s best to have a long think and define some clear goals for your future. Do you want to plan for your retirement? Save for a house? Pass something on to your children? Whatever it is, decide how much you would need and by when. Most investments give better returns if you have a longer-term commitment, so it’s OK to think big. If you have no clue and are just investing for the sake of it, you will quickly lose your drive and passion for making money.

These steps may seem simple, but they really are the key to an effective investment strategy. I work with clients every day to ensure that they have budgeted correctly, serviced their debt and built an emergency fund, and together we work together to work towards their financial goals. Many find that this is more complex than they first thought and will include tax planning and ensuring that their assets are protected. This is of course one of the added benefits of hiring a professional. If you feel that these services are something you would require, feel free to reach out at via my contact page!

Updates On The UK Spring Budget 2024

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For Brits, the most recent Spring Budget announcement was incredibly important, as it gave us some very key and drastic updates for tax and spending. Essentially, Chancellor Jeremy Hunt aimed to deliver lower taxes, encourage investment and improve public services. Although the elections may affect this announcement, it’s still very important for Brits, particularly those abroad, to be aware of. Martin at Spice Taxation (Company Registration No. 202133724G), has written a very in depth piece on the Spring Budget. It’s incredibly useful to hear the views of a professional tax expert, and Martin has been kind enough for me to share his thoughts here. Of course, I myself am not a UK Tax expert, so I often seek the help of professionals, such as Martin, to help me and my clients with their tax planning when necessary.

Below is Spice Taxation’s write up on the matter.

Our Thoughts on the Spring Budget – 6th March 2024
The Most Important Budget for Expatriates since 2010


“Over the years I have discovered that I am just not very good at predicting Budgets. Speculation is always rife about what a Chancellor might do in face of this and that economic and political situation, but mostly the actual announcements just tend to underwhelm and disappoint. Maybe I just crave excitement!


However, all that changed with Jeremy Hunt’s Budget on 6th March. It is likely to be the last Conservative Party Budget before the next General Election – an election which the Labour Party is widely expected to win. So, it remains to be seen how many of the announcements will find their way onto the Statute books if Labour does win. That aside, it really was an exciting Budget which promises a lot of change, much of it positive.


For much of the speech, it felt like a ‘normal budget’ with a plethora of announcements about regional incentives, funding initiatives, levelling up grants, subsidies and tax breaks for the arts etc. However, there was also a number of genuinely eye-catching and important announcements which are also relevant to expatriates.


First of all, Jeremy Hunt announced a further reduction in National Insurance paid by employees and the self-employed of 2%, from 6th April 2024. For employees, this will reduce from 10% to 8% and for the Self-Employed from 8% to 6%. For those returning to the UK, this will be welcome news.


Secondly, he announced the intention to introduce a new Individual Savings Account – the UK ISA, with an annual subscription allowance of GBP 5,000, in addition to the existing threshold of GBP 20,000. This new ISA would hold British-only assets – equities listed on the four recognised UK stock exchanges, UK corporate bonds and gilts and collectives. This will be good for UK resident savers.


Third, there were a few property tax announcements which came as a surprise:


o The marginal rate of Capital Gains Tax on the sale of residential property will reduce from 28% to 24% from 6th April 2024. This is intended to help stimulate the property market. The basic rate will remain at 18%. This is good for anyone selling, gifting or assigning an interest in UK residential property from that date.


o Multiple Dwellings Relief for Stamp Duty Land Tax is being abolished from 1st June 2024 – this was a relief that allowed you to take the average purchase price for SDLT purposes where at least two properties were being purchased in a single transaction.

o Furnished Holiday Letting status is to be abolished from 6th April 2025, with some anti-forestalling provisions which came into effect on 6th March 2024.


o The geographical scope of Agricultural Property Relief and Woodlands Relief (two Inheritance Tax incentives) will be limited to assets situated in the UK only from 6th April 2024 – those situated in the Crown Dependencies and the EEA will lose their IHT protected status.


Fourth, the VAT registration threshold will rise to GBP 90,000 from 6th April 2024, an increase of GBP 5,000, which will be welcome news for small businesses.


However, perhaps the biggest and most barnstorming announcement was the abolition of ‘non-dom’ status from 6th April 2025. The Conservative Party has been a staunch defender of the ‘non-domiciled regime’ over many years, so it was something of a surprise to see them adopt an avowed Labour Party policy. Stealing their thunder no doubt. It is a very major announcement that will impact many people.

In a nutshell, the Government plans to delink a person’s ‘domicile status’ from their UK tax outcomes, and move to a residence-based set of incentives. Consultation documents are yet to be published, but the main features of the new system will be to:

– Abolish the ‘remittance basis of taxation’ for UK resident ‘non-doms’.

– Replace it with an opt-in system that will allow, seemingly anyone – including, presumably, British nationals – to exempt their non-UK incomes and gains from UK tax for the first four years of UK residence, provided that they have been continuously non-resident for at least the 10 previous years.

– Exempt from tax the remittance of these non-UK income and gains to the UK, which will be hugely simplifying in the long run.

– Retain Overseas Workday Relief for qualifying individuals for the first 3 tax years of residence.

– Apply world-wide taxation for all individuals from the 5th year of residence in the UK.

– Introduce a thoughtful set of transitional reliefs for certain ‘non-doms’ who are already resident in the UK

– Switch away from a ‘domicile based’ system of Inheritance Tax to a residence-based system, whereby qualifying individuals switch to IHT on world-wide assets only after 10 years of residence.

Keep anyone who leaves the UK within IHT for 10 further years, which presumably also will apply to British Expatriates too. UK assets remain within Inheritance Tax at all times, regardless of residence.

We are missing a lot of technical detail here which should be answered by the Consultation Documents that the Government will be publishing shortly. So watch this space! However, whilst I have many more questions than answers at the moment, at first sight the main impacts appear to be the following:


a) Tax planning for relocation to the UK is likely to change quite a bit and these proposals could amount to a generous tax break for returning British expatriates.


b) They will also make Inheritance Tax planning potentially a lot simpler and not so reliant on subjective judgments about where a person is domiciled.


c) It might possibly result in an exemption from Inheritance Tax for a swathe of non-resident British expatriates who have already been non-resident for at least 10 years, which would be quite a result!


I am going out on a limb a little by saying that it appears the proposals will also apply to those we currently regard as ‘domiciled’ in the UK. However, surely that is the point – it is switch away from a tax system where a person’s domicile was the deciding factor, to a tax system where the deciding factor is driven by residence. This potentially bodes extremely well for British expatriates.
If this Budget does turn out to be the Conservative Party’s fiscal swansong, it is perhaps fitting that its period of Government will be bookended by a commitment to enshrine in law a statutory test for residence in 2010 at the start, and a set of announcements that displace domicile with a new regime based on that very residence test at the end. Mastering the Statutory Residence Test is clearly going to be more and more important.
Beyond this, all tax rates, thresholds and allowances for Personal Tax remain frozen, as do the rates for Corporation Tax. The dividend allowance will fall to GBP 500 from 6th April 2024 and the Capital Gains Tax Annual Exemption will fall to GBP 3,000 from the same date. Class 2 and Class 3 voluntary National Insurance Contribution rates will remain unchanged at GBP 3.45 per week and GBP 17.45 per week respectively, and the New State Pension will rise to GBP 221.20 per week (of GBP 11,502.40 per year) from 6th April 2024.”


If you would like to discuss your own circumstances in confidence or would like to be on the subscriber list for Spice Taxation’s new dedicated coverage of these breaking developments, please contact Martin at martin@spicetaxation.com or by sending a Whatsapp to +65 96650019.

I’d like to thank Martin at Spice Taxation for allowing me to share this information with my readers. I am sure that this will help many of you plan your finances in relation to UK tax.

How Did One Of History’s Smartest Men Get Scammed?!

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Even though we’ve all heard the phrase, ‘if it’s too good to be true, it probably is’, there are many that will choose to ignore red flags in the hope that this is not the case. This is true even in investment- if fact, I have written many articles on risk tolerance vs reward, and investment scams (I’ll link below). But it seems that investment scams are not a new thing, and even the smartest person could still fall for them! Did you know that even Sir Isaac Newton, the man who discovered gravity, fell for an investment scam!

Why Financial Advice is Better than DIY
Read up on how a professional can help you avoid investment scams!
Is Volatility A Good Thing?
Why fluctuations are normal in the market, and how not one investment can perpetually go up, without any downs.
How To Spot An Investment Scam
How you can do your own due diligence in spotting an investment scam!
The Pros and Cons of Crypto!
An example of a bubble many investors bought into…

In the early 1700’s, Sir Isaac Newton lost £20,000 in the South Sea Bubble- this amount would now be worth approximately £4,000,000 today! The ironic thing is that he had actually sold his shares in 1713 at a profit, but then was lured back in and lost it all when it bankrupted Georgian London in 1720.

The South Sea Bubble was a pyramid-scheme backed by the government, at the dawn of fiat currency. The Bank of Scotland had issued the first ever paper bank notes back in 1695, which Newton was a great advocate for. He had previously ran the Royal Mint, and he felt that the Mint could never keep up with the demand for producing coins to keep up with the growing economy.

Naturally, many during this period were suspicious of paper money, because it could be easily forged and had no intrinsic value, and Newton fell privy to many con artists and forged notes, in which he made it one of his missions to seek justice for.

But what was the South Sea Bubble and how did Sir Isaac Newton, one of the world’s most intelligent thinkers, fall for it? At the start of the 18th Century, the British Government’s debt was huge. To ease this burden, the government created the South Sea Company, by requiring investors to exchange their government debt holdings for South Sea stock. Much like ‘pump and dump schemes’ that we know of today, the company’s directors grossly inflated stories and hyped up the company so much that new investors saw impressive returns, such as Newton, whose first investment grew by 100%. It was at this point that he sold his stock, happy with his profit.

However, as the stock continued to rise, Newton became envious of those who were still invested. He became so envious, in fact, that he bought into the stock again, and put a larger amount of his wealth towards it. The South Sea Company achieved very little in terms of growth and in September 1720, the bubble finally burst, rendering many of its investors bankrupt.

What Can We Learn From This?

Although Sir Isaac Newton was more intelligent than most, he still made many common human errors. The first is FOMO (fear of missing out), which isn’t just applicable for not going out to the party; he saw everyone else enjoying the continued profits and felt that he shouldn’t have cashed out early. Herd mentality was another human error- quite often people will want to follow the crowd, and invest in an asset class because ‘everyone is talking about it’ or ‘everyone else is doing it’ (NFTs & Crypto ring a bell anyone?). He quite obviously ignored the red flags and practised ‘selective hearing’- remember this man co-created calculus; he should have known that the numbers weren’t adding up and this was a bubble soon to burst, but he ignored the warning signs.

The most fatal flaw arguably, was greed. People become excited at the thought of making money quickly, and unfortunately this is a driving factor in people making poor investment decisions. He did not take the emotion out of investing, and succumbed to greed. If you can put your emotions aside, you can actually become a better investor than Sir Isaac Newton.

How To Take Emotion Out Of Investing
Why emotions can hinder investment planning.
How To Be A Successful Investor!
How can you not make the same mistakes as Newton!

How NRIs Can Make The Most Of Their Time In Singapore

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A recent study by the Ministry of External Affairs Consular Services showed that NRIs (non-resident Indians) make up 24% of Singapore’s ‘non-resident’ population, which is currently at 1.4 million. Even though this group is referred to as ‘non-resident’, they are living and working as professionals in Singapore. This means that they are not considered as tax residents in India. Many of my clients come from this demographic, and as such, I felt it would be best to share some of the topics we discuss, namely, what they can do whilst they are living and working in Singapore to make the most of their time here.

  1. Saving

I will admit that Indian bank accounts have great interest rates- general public interest rates can be as good as 7.85% per year, and this often puts many NRIs off saving or even investing in Singapore, because they feel that the rate of return is low in comparison. However, there are many factors that have to be considered, which I believe makes Singapore a good place to build wealth. The first is that the Singapore Dollar is a stable currency. INR continues to depreciate against SGD by 3-4% per annum, with an inflation rate of 5.69%, meaning that rupees purchasing power will become less and less as the years go on, meaning that saving in INR and Indian bank accounts may not be as beneficial in the long run. The SGD is among one of the few stable and most traded currencies globally. It is regarded as a safe haven asset that also hedges against currency risk.

Not only that, the Singapore banking system is not only safe but simple; the Monetary Authority of Singapore esures tight regulations, but it doesn’t mean more bureaucracy. It is quite simple to transfer money around or even overseas from Singapore. This is in contrast to India, where there are still a lot of tedious processes in place, especially when it comes to selling a property as an NRI, or moving money out of the country.

2. Tax Relief Opportunities

This may be one of the most attractive reasons for NRIs to plan their finances in Singapore. There are many different kinds of taxes in India, whether that be direct or indirect. Direct taxes include things like income tax, capital gains tax or gift tax, with indirect tax including customs duty, value-added tax and service tax. This tax-heavy system can eat into your bank interest rate or your investment rate of return. In Singapore we have no capital gains tax, low income tax in comparison to other countries, and lots of tax reliefs, such as the SRS scheme (check out my articles on this topic here https://danielleteboul.com/2023/08/10/why-should-expats-open-an-srs-account/).

Source:

India Today Web Desk

New Delhi,UPDATED: Feb 1, 2023 14:14 IST

3. Investing

Speaking of capital gains tax and SRS accounts; there are many great investment opportunities here in Singapore. For example, in India, offshore funds are restricted. This means that many clients I encounter have excellent domestic portfolios (and don’t get me wrong, India is one of the champions of emerging markets, so it’s a must in someone’s portfolio!) but it is not diversified in terms of geographical location. Not only does that increase your investment risk, but it also means that you as an NRI are only having a small piece of the pie. In Singapore, so long as it is regulated and approved by MAS, you are not restricted to the funds you have. You can have access to regional, global, US, European, emerging market funds. And all of this is incredibly convenient, flexible and cost-effective. It’s pretty much the best of both worlds because you have the safety of Singapore, with the unlimited upside potential of global assets.

4. Being Of NRI Status

Being an NRI definitely has more perks than being a tax paying resident in India, such as all the previous things I have mentioned. Not only that, it means that whilst you are an NRI, you do not have to pay taxes on foreign investment or gifts received from relatives. This of course changes when you are back to being a tax paying Indian resident, with 20% tax on foreign capital gains. This is why it is crucial to make the most of your NRI status whilst you are earning in SGD. Ideally, you can build up a nice pool of assets and savings whilst overseas, and then once you retire or settle down in India, you can plan your finances accordingly following Indian tax ruling. The fact is that not every Indian will get the chance to become and NRI, and the Indian government has allowed many concessions for NRIs living and working overseas, to encourage globalisation. It is best to make the most of being an NRI, enjoying the stable and strong currency of SG, whilst enjoying offshore investment returns.

At the end of the day, we cannot avoid tax, and with many NRIs (60%) still preferring to retire in India, tax is inevitable. But, there is a window where this doesn’t have to be the case. Singapore is a capital gains haven! Why would you pass up on that opportunity!

A Political Year For 2024

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2024 may be the biggest election year ever, with almost half of the globe voting! At least 64 countries, plus the European Union will be voting and holding national elections. This is a massive year for global politics, so I thought I would discuss some of the notable elections and ones that interest me (don’t worry, I shan’t talk about all 64!).

US

This one probably makes us groan, and I’m sure we’re all bored of hearing about Trump & Biden, but this is arguably the most important election out of the lot. The US is the largest global power, and this election could see a change in USA’s relationship with North Korea, China, Russia and their stance on the ongoing conflicts in Gaza and Ukraine, depending on who wins. Also this is probably the only one where one of the candidates was a previous president who got impeached twice?

Taiwan

I feel like the whole world has been holding their breath when it comes to Taiwan & China, and this election will be no different! The winner of the Taiwanese election will have a tricky balancing act with China, and it’ll be interesting to see if Beijing continues its hold on the island, and whether the imminent threat of invasion will remain.

North Korea

This is interesting, because I didn’t even know the Democratic People’s Republic of Korea had elections (?!). I’m sure the Kim family, who are seen as somewhat deities in North Korea, don’t have an opposition party? What’s even more interesting, is that every election has been given a ‘freedom & fairness’ score (with 0.00 not being free nor fair at all, with 1 being the most free and fair), and North Korea scored higher than a lot of countries! I thought it would score 0.00, but it scored 0.14, which was higher than Venezuela- which I also expected to be low! Countries that scored 0.00 were Syria, Mali, Chad and South Sudan.

India

This election will be one to watch; not only is this election the largest in the world, but India is a rising global power and one of the most populous countries on the globe. The outcome may change not only domestic policies, but also regional politics, particularly concerning China. It may also escalate (or hopefully deescalate) the country’s rising Muslim/Hindu tensions.

Russia

Shockingly another country that’s free & fairness is not at the bottom of the list (although it is above North Korea)! But I don’t think anyone will be shocked when Putin is re-elected and the current trajectory of Russia’s geopolitics continues- i.e. the war continuing.

EU

Sadly, we’ve seen a surge in right wing parties in Europe, and I’m wondering if this will continue into 2024? It seems that a lot of centre-right parties will maintain their current positions, with even far-right parties gaining traction. The main points for discussion will of course be how the EU navigates conflicts, such as in Ukraine and Gaza, along with its green policies and the EU budget. Deficit Rules were suspended during the pandemic, meaning that members were allowed to borrow whatever they wanted to support their citizens, but this is set to be scrapped in 2024, with Deficit Rules being reinstated. Will this create tension between members?

Indonesia

I don’t have a tonne of opinions on this, but I thought it was interesting to note that Indonesia’s elections are only being held over one day! That’s the largest single-day vote, and I wonder how they are going to pull that off in such a large country that has some very remote locations.

Ukraine

Even though Ukraine is under Martial Law, which normally prohibits elections, there has been talk of these elections continuing, as a mark of democratic health. However, this may prove to be too challenging to organise during a war, with safety being a main concern. Either way, Zelenskiy is set to run for a third term, and he will probably win, with his ratings still remaining very high. However, parliament would have to change the law so that Ukrainiens can vote from overseas.

UK

The outlook of British politics has been bleak for a while now, and with the Conservative Party being in power for the past 14 years, some believe that Labour will win the next election, which Sunak has said will be held this year. This is conflicting for me- whilst I am desperate to see the Conservative Party go, and end their reign of austerity, I’m not convinced that the Labour Party will do a better job. Not only that, I have found myself shocked at every vote and election result in the UK for the longest time. None of us thought Brexit would happen, and how naïve we were to think that we would remain. So I’ve learnt to never think that the obvious flaws of the current party, means that they won’t be re-elected!

Whilst this may be the biggest election year ever, it may also be the most challenging for democracy, with many elections being carried out unfairly, or with risk of danger. Not only that, shock decisions and outcomes may shake the geopolitical framework as we know it. It’s going to be an interesting year for sure.

For the full information on the freedom & fairness score, check out Our World In Data: https://ourworldindata.org/grapher/free-and-fair-elections-index and for the full list of elections, along with dates & scores, check out this great article by Time: https://time.com/6550920/world-elections-2024/.

Why Cash Is Not ACTUALLY King!

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Over the past year or so, we have seen a rise in interest rates and fixed deposits have offered quite attractive returns. Some may be inclined to put all their savings into these guaranteed bank deposits, but is this a smart decision?

I have spoken to many in the past year that are putting off investing because they find fixed deposits more favourable. They believe (which is true) that investments, such as equity and property, is uncertain. So they would rather pick the safer option of fixed deposits. Whilst I do agree it is always a good idea to have liquid cash and sufficient savings, I do believe that your excess money is better off growing elsewhere.

Cash Cannot Beat Inflation

When you put your money in a fixed deposit, you will only gain the guaranteed amount, never any more. Whilst some see this as a good thing, in periods of high inflation (like over the past couple of years), your cash is losing spending power. And inflation is a problem that will always be there; it is not something we can ignore, and historically bank deposits have not battled inflation in comparison to equities.

Lock Ups & Opportunity Costs

In order to receive the guaranteed rate of return of a fixed deposit, you quite often will have to fulfil a tenure. I will admit that these days you can find fixed deposits with quite short tenures, but this often means that inflation may have eroded your guaranteed returns, leaving you with net zero or even negative gains! This also means that you are exposed to reinvestment risks; you as an investor may not be able to reinvest the cash you receive from a matured fixed deposit at the same or better rate again. This shows that bank deposits are good for short-term situations, but have more cons over the long-term. In contrast, historically, investing in equities or bonds have proven to grow capital and protect yourself from inflation.

‘Safe’ May Not Really Be Safe

It has become more apparent recently that the chance of a bank defaulting may not be is minute as we once thought- just look at Credit Suisse, Signature Bank and SVB to name a few. This means that your ‘guaranteed return’ may not actually be guaranteed. Banks are covered by the Deposit Protection Scheme, but take note that generally these limits are not very high. This means that if you have anything more in a fixed deposit, or indeed in a bank account, and the bank folds, they are only obligated to pay you up to that limit, nothing more. To avoid this, it may be a sensible idea to spread your cash across different institutions, not leaving all your assets with one bank. Investing in portfolios can also help you diversify risk, whilst having access to possible high returns, and holding up against inflation long-term.

If anything, market volatility has proven to us that a few key financial principles, such as planning long-term and diversifying to mitigate risk, are very important guidelines to follow. Whilst fixed deposits seem attractive short-term, they expose you to reinvestment risk, and are therefore only beneficial for short-term savings. Focusing all your financial planning on one bank or indeed one savings account, means that you are not diversifying, and not only are you at risk if the bank defaults, but you are also missing out on possible higher returns you could be getting from investment. Cash may be key for every-day living, but it is definitely not king when it comes to successful, long-term planning.

Let’s Talk About Finance Basics For Young Women

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I’ve just finished my new ebook: Let’s Talk About Finance Basics For Young Women!

In this ebook, I’ll be delving into the socio and psychological consequences of financial literacy, along with how our upbringing could have affected our money mind. Not only that, I have a few strategies on how to discuss money without shame or judgement, along with some basic budgeting tips and what we should be saving for.

Feel free to read, share and let me know what you think!

lets-talk-about-finance-basics-for-young-women-2Download

Serenity Now! How Did Seinfeld Manage To Afford Living In New York?!

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“People don’t turn down money! It’s what separates us from the animals.” – Jerry

Seinfeld is one of my all-time-favourite TV shows. Most people were into F.R.I.E.N.D.S (not that there’s anything wrong with that), but I much preferred the self-deprecating jokes of Jerry, George (especially George), Elaine, Kramer, and even Newman (hello, Newman). If you’re unaware of the plot of the show, it’s a show about nothing- four friends living in New York, navigating their tragic love and work lives. But what I never understood is how Jerry, an a comedian working the club circuit, and Kramer, who is perpetually unemployed, could afford to live in Manhattan. Like my Sex & The City and Homer Simpson article, let’s explore that here.

“Who goes on vacation without a job? What do you need a break from getting up at eleven?” – Jerry

Let’s start by talking about Jerry. Whist Seinfeld in real life is a mega multi-millionaire, that’s not the case in the show. In the show, Jerry is a lesser known comedian- and in the 90s comedians couldn’t supplement their income as much as they do now with social media posts and advertising. The New York Times did a study and found that the income range for comedians varied from about $30,000 per year, up to $200,000 a year. Jerry would have been on the lower end of this spectrum, earning about $35,000 per year, Market Watch estimates. This is fairly low, considering that Jerry’s apartment, 129 West 81st Street, is very close to Central Park, and is thus a prime location. Right now, a one-bedroom apartment in that area costs $3,000 a month. If we work backwards inflation-wise, back in the 90s that would have been about $1,200 a month. This would mean that, after tax, deductions and rent, Jerry would have $14,271 surplus income annually.

“Jerry, just remember, it’s not a lie if you believe it.” – George

If you watch the show, Jerry’s lifestyle is not that frivolous, unlike Carrie Bradshaw. And we know that Jerry has the ability to save as in one episode he buys his dad a Cadillac, which back then would have been more than $30,000. Speaking of cars, Jerry also had his own car, which, considering he lived in central New York, is a big expense. He could have just used public transport like the Subway, as parking in NY is expensive. Jerry drove a BMW, which would have cost about $40,000 back then. So how did he manage to pay for two cars amounting to about $75,000 in total with only a $1,189.25 monthly budget?!

“I’m disturbed, I’m depressed, I’m inadequate. I’ve got it all!” – George

So, Jerry’s lifestyle is not too difficult to comprehend; most of his money goes on rent and his car and he doesn’t do too much else. He mostly eats at home or at that very cheap café and is generally a good saver. But what does baffle me is Kramer- Cosmo is either unemployed, is in the process of suing someone, or is running one of his various get-rich-quick schemes. He is Jerry’s neighbour, so how could he afford it?!

 “Do you have any idea how much time I waste in this apartment?” – Kramer

Kramer has almost had as many random jobs as Homer Simpson; Santa at a department store (which he got fired from for being a communist), a coffee table book author, a guy in police line-ups, the list goes on! All of these seem to not pay that much in terms of salary, and he turns down a lot of pay-outs from his lawsuits in exchange for things like free coffee or a billboard in Times Square. Why would Kramer pass up on so much cash if he has no stable income? This leads me to think…does he come from generational wealth?

“I’m speechless. I’m without speech.” – Elaine

I think the only valid conclusion I can come to is that Kramer’s father or his side of the family has left Kramer a lot of money. His mom works in a restaurant, so it’s probably not coming from her, but we don’t really hear anything about Kramer’s dad. Therefore, the only suitable answer I have is that Kramer’s dad is so rich that Kramer doesn’t care about money and can afford a decent apartment in central Manhattan and doesn’t need a job.

“You got a question? You ask the 8-ball.”- David Puddy

I will continue to review these shows that defy the laws of finance and budgeting, like Seinfeld, Sex and the City, and The Simpsons, but let’s not forget that the writers are very clever in smoothing out these questions by writing in things such as a rental cap, random relative’s inheritance or someone lending them money. But I do think it is funny how most of these shows are in the 90s and in New York, it almost makes me think, “Was it cheap to live in New York back then? Was the 90s just a wealthy time?” I guess until I invent a time machine, I will never know…

Technology & Investing

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Technology has become so integrated in our day to day lives, I believe it has totally changed the way I do business. Not only this, but it has also helped my clients in gaining more knowledge and confidence in what they are investing in. This in turn, has helped me in my business, as I believe that knowledge is key to success. I am a Personal Wealth Manager who specialises in bespoke financial planning for clients in Singapore, blending personal and professional financial advice with all-important tax planning. I wanted to share with everyone that platforms and tools I currently use to help my clients, plus some tools that the everyday investor can use to successfully plan, visualise and research your investments and finances.

FE Analytics

This online platform is a complete game-changer for me. FE Analytics is more worthwhile for financial planners, investment analysts and others in the finance space, because the subscription fee is quite substantial, but it is an invaluable tool. I use it to create portfolios for clients, review and project investments and compare their current portfolios with bespoke ones I have created for them. What I love about this platform is that it will gather global data, from companies like Bloomberg, Yahoo Finance and others of the sort, to compare key investment data points, such as performance vs. benchmark, volatility, risk and even ESG rating. Volatility and risk are an excellent thing to show to clients, as they can clearly see how erratic their investments are in comparison to their performance. In today’s ever-changing world, many of my clients are become more conscientious and circular economy-focused, so being able to show an ESG rating adds value to them.

Even though an average investor may not have access to this platform, it is important to know that every legitimate investment will have a code, which can and should be easily found on websites, such as Yahoo Finance, so that you can clearly see the funds performance, fees and charges, and have full transparency in information of the investment. If you cannot find this number, or there is no information online about your investment, this could be a red flag.

OPAL Fintech

OPAL is one digital business account for your business and financial needs. I really enjoy using this platform because it is a perfect visualisation of a person’s goals, dreams, aspirations and current situation. All I have to do is input a client’s cash flow, assets, debt, and then discuss with them their financial goals. This may be plans for retirement, saving for a property, planning for a child’s education, or even leaving a lumpsum for their family when they pass on. The OPAL algorithm will assess their current situation, factor is real-life data, such as inflation, and project how likely it is for that goal to happen. Then, it can be tweaked and adjusted, showing multiple scenarios depending on how much the client is setting aside into investments. I often feel like, because financial planning is very numbers-heavy, people can find it difficult to visualise their goals clearly. I don’t have that issue with OPAL, because the graphics and projections perfectly paint the picture for the client.

Budgeting Platforms

But what if you do not have access to these paid platforms? I would first off recommend tracking your cashflow on a monthly basis and being conscious of your assets vs. debts. There are loads of budgeting apps that you can use. For example, DBS Online Banking has an interface that illustrates your monthly inflowing cash and outgoings. If you’d like something a bit more in depth, so that you can go through these figures with a find-toothed comb, I would recommend apps like Zenmoney, Monny or Spendee; all of these (and ones similar) are free and user-friendly for the consumer. Some will consolidate your spending habits into presentable data and graphics, others will incorporate some gamification in order to encourage you to hit your spending and saving goals. There are many on the market in Singapore, and you just have to play around and find whatever works for you. I prefer to use the DBS NAV Planner paired with an Excel spreadsheet, but others may prefer the other apps mentioned here.

Stock Screener

If you are investing in individual stocks, or if your portfolio comprises of equities, you can always use stock screeners to check key analytics like the market cap, yield and sector. You can also delve further into the figures and statistics, like viewing the past 5 years performance and other metrics. You can also check company announcements and financial statements, which is perfect for those investors that like to research in depth. For Singapore stock exchange, you can use https://investors.sgx.com/stock-screener.

General Learning & Boosting Your Knowledge

As I mentioned at the start of my article, knowledge is power. If you don’t have a basic level of knowledge, this is quite often the blockade that is stopping you from investing, which means that your money is being eroded by inflation. You may be concerned of misinformation out there, but don’t worry, there are many great, informative platforms you can use to educate yourself. The first is Investopedia, which is essentially a Wikipedia for all things money and investing. Here you can find simple to understand financial concepts, investment terms and even information on past historical events in the finance world. The Balance is a great website that hosts a wide range of information, from which loans give the best rates, what stock market apps are easy to use, to how to discuss finances with your children. This is really a font of knowledge and a go-to for anyone who just wants to get more clued up on finance. I would of course recommend keeping yourself up-to-date with news by checking out The Financial Times, Bloomberg and CNBC, as well as other credible finance media outlets.

In this world of technology, finance and investing have become accessible to the masses; what once seemed only for the super-savvy or wealthy, is now at the click of a button to almost everyone who owns a computer or smartphone. This readily available information is not something we should shy away from; these are wonderful tools we can use to do our own due diligence and ensure that we are planning our finances and investments correctly. Technology has pushed for a need for transparency in the finance sector, so what a better time to start investing! You have all the knowledge, resources and tools to do so responsibly, and with some level of understanding. However, for those that are not as savvy, or for those that have a full schedule, you may not have the time to commit to constant research. I don’t blame you- if it wasn’t my full-time job I probably wouldn’t either! This is when you can lean on the advice of a professional, who will have all these tools at their disposal, with the added expertise and wisdom to help you navigate investing effectively in accordance with your risk tolerance and unique circumstances.

(Remember that if you are struggling to find information available online of an investment, to tread lightly, as a lack of transparency may also mean a lack of legitimacy.)

Is Volatility A Good Thing?

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You may have heard the word ‘volatility’ when referring to investments. When an investment, or market, is volatile, it means that there are great fluctuations and market disruptions. You may look at your investment one day, and it could be up by 20%, the next it may have dropped to -5%. Usually, if you hold your investment long-term, it will weather the short-term volatility, meaning that all of these ups and downs don’t matter too much, because your investment will have grown overall. A volatile investment can be a stressful one if you haven’t taken emotion out of investing. It’s always best to remember your investment goals, understand that investments work well long-term, and understand that the market will bounce back. If you haven’t read my article on ‘How To Take Emotion Out Of Investing’, you can read it here:

https://danielleteboul.com/2021/05/27/how-to-take-emotion-out-of-investing/: Is Volatility A Good Thing?

Whilst volatility is inevitable- and investments with low fluctuations are generally more conservative and may not bring as high returns- is it a good thing for us as investors? Is the possible stress of a roller-coaster market worth it? What if I invest a lump sum at the wrong time? In this article, I will deep-dive into the question…is volatility a good thing?

No-one can successfully time the market correctly every single time, especially a novice investor who has a full time job and other responsibilities, meaning they can’t sit and watch the stock market all day. Therefore, I think it’s key to remember, ‘time in the market, versus timing the market’; drip feeding smaller amounts of money over regular intervals over the long term, can often mitigate the risk of volatility. This concept of ‘dollar-cost averaging’ is a very simple yet important strategy to remember. So long as you stay the same with your investments and don’t fluctuate on your stance, you can weather the ups and downs of the market.

As I hinted to earlier, an investment that barely fluctuates, is often more conservative in its risk profile, meaning that there may be lower risk of losses, but also the returns may not be high. On the flip side, a well chosen investment that fluctuates, may mean that your investment is volatile, but on the whole rises faster. So ask yourself, would you rather have little fluctuations in your investment and possibly never reach a decent rate of return, or would you be OK with taking the risk on the volatile investment in order to access to possible higher returns?

For those that are a bit more savvy, they may be keen to buy more at a dip in the market. Although timing the market is very difficult, sometimes the market will be down for a longer period of time. For example, the dot come bubble started collapsing in 1999 and didn’t end until 2002. Can you imagine how happy you would be if you had bought Apple or Microsoft stocks during this period, when the world was losing faith in new technology, and you had held onto those stocks until now? This is a brilliant example of being a market opportunist, whilst still having long-term investment goals. This is an extreme example, but the idea still stands. If the down period of the market has been continuous for quite some time, it’s best not to hesitate. If you have the capacity to invest more, do so before the market goes up, and reap the benefits in the future.

If you are struggling with emotionally dealing with market volatility, you may want to consider a hands off approach and engaging professionals to do the work for you. Fund managers will be able to understand the peaks and troughs of the funds, making well-informed and educated decisions on how to rebalance your portfolio. One of the strategies they will take will be diversification, essentially not having all your eggs in one basket. If you have a portfolio of a wide-range of investments in different asset classes and geographical locations, you mitigate the risk of losing it all if something goes wrong.

For example, imagine two people have invested in the Brazilian stock market; Person A has invested 80% of their portfolio, whilst Person B has only invested 5%, whilst having a basket of stocks in other areas. Now imagine that Brazil goes into political unrest, a military coup is held, and the new leader is isolationist…the Brazilian stock market busts! Oh no! Person A has lost 80% of their investment, and who knows how much it could drop, and maybe keep dropping! Whereas Person B has only lost 5% of his portfolio. Yes, this is annoying, but not as catastrophic as Person A’s situation. And who knows, Person B may have benefited in other areas. Maybe because of the situation in Brazil, the country no longer exports raw sugar, and this causes India’s raw sugar exports to go up. This is great news for Person B, because they have also invested in Indian funds, that have benefitted from the Brazilian coup!

Whilst volatility often holds negative connotations, it is dangerous to think of it in this way. Volatility can work to our advantage, and be beneficial for us, so long as we stick to certain investment principles, such as dollar-cost averaging, taking the emotion out of investing and diversification. Not only that, if we are opportunistic about our lump sum investing, this could massively benefit us long term. As always, the key is that long-term investment strategies will be able to survive short-term market fluctuations. Here is an excellent diagram I found to demonstrate this. I hope you found this article useful, and if you did have any more questions on this topic, I would be happy to answer.

This chart shows the span between the largest average 1-year, 5-year, 10-year, and 20-year gains and losses among three key market indexes for the period 1926–2009. As you can see, short-term holdings (especially in stocks) are extremely volatile. Historically, a long-term approach has provided a much smoother ride.