For many expats here in Singapore, we are earning in SGD, but we may have cash or assets in various other currencies. This can often pose certain additional risks when it comes to investing, mainly, currency risk. Currency risk, also known as exchange rate risk, is the risk that the value of your investment will fluctuate due to changes in the exchange rate between, for example, the euro (EUR) and the Singapore dollar (SGD). Here’s how this risk can affect your investment, and what you should take note of before you decide to invest in a certain currency: (FYI I’m going to be using euros as the main example currency here)
Fluctuating Exchange Rates: If you invest in assets denominated in euros, the value of those assets will be influenced by the exchange rate between the euro and your home currency (SGD). If the euro strengthens against the SGD, the value of your investment in SGD terms will increase. Conversely, if the euro weakens against the SGD, the value of your investment in SGD terms will decrease.
For example, if you invest €1,000 and the exchange rate is 1 EUR = 1.5 SGD at the time of purchase, your investment is worth 1,500 SGD. If the exchange rate later changes to 1 EUR = 1.3 SGD, your investment would then be worth only 1,300 SGD.
2. Impact on Returns: Currency fluctuations can significantly impact your returns. Even if your euro-denominated investments perform well in their local market, adverse currency movements can erase or diminish your gains when converted back to SGD.
3. Hedging Options: To manage currency risk, investors can use various hedging strategies. These may include forward contracts, options, or other financial instruments that can help offset potential losses due to currency movements. However, hedging comes with its own costs and considerations. I don’t often suggest this to my clients as hedging is a higher-risk strategy. However, for an avid & experienced investor, this is a good option.
4. Diversification: Diversifying your investments across various currencies can help mitigate currency risk. By holding a mix of assets denominated in different currencies, you may reduce the potential negative impact of fluctuations in any single currency. Diversification, as you will know if you’ve read a lot of my articles, is a key part of investing, and whilst it’s not smart to invest in every single currency, having a mix of currencies such as the one you earn in, the one where you have assets etc. is a good way for lessening exchange rate risk.
5. Long-Term vs. Short-Term: If you are investing for the long term, short-term currency fluctuations might be less of a concern since over time, currencies tend to fluctuate in cycles. However, if you’re looking at a shorter investment horizon, currency risk may significantly affect your returns.
6. Global Economic Factors: Currency values are influenced by a variety of factors, including interest rates, inflation, political stability, and overall economic performance in both regions. Staying informed about these factors can help you anticipate potential currency movements.
These are key points to remember if you are faced with currency risk; investing in euros while earning in SGD exposes you to exchange rate risk, which can affect the value of your investments when converted back to your home currency. It’s essential to consider this risk in your investment strategy and explore ways to manage or mitigate it based on your investment goals and risk tolerance.
Moving to a new country can be an exciting adventure, but it often comes with uncertainties, especially regarding the cost of living. A higher salary is often not the only thing that people take into consideration when deciding to move; often things like standard of living, ease of transport and travel, and tax often come up into consideration. For many expats, Singapore is regarded as a desirable destination due to its vibrant culture, outstanding infrastructure, and excellent job opportunities. However, understanding the financial landscape is crucial for any newcomer. Today, I will try to give a comprehensive breakdown of Singapore’s cost of living for those considering a move to this dynamic city-state.
Housing Costs
One of the most significant expenses you will encounter in Singapore is housing. The city’s real estate market is known for its high prices, particularly in central areas, such as River Valley or Tanjong Pagar, where many expats prefer to reside. Rental prices can vary greatly based on location, property type, and proximity to public transportation. On average, expats might find that a one-bedroom apartment in the city centre could cost anywhere from SGD 2,800 to SGD 4,000 per month, although I’m beginning to see less and less of the lower cost options than when I first moved to Singapore. In contrast, units in suburban areas may be more affordable, typically ranging from SGD 1,800 to SGD 3,000. Generally, if you wish to save on cost, it’s better to opt for a HDB or Private Apartment over a condo. It’s important to determine your housing budget early and explore various neighborhoods to find an area that suits your lifestyle and financial constraints. I would say, try to spend no more than 20% of your income on rental.
Transportation
Singapore’s public transportation system is highly efficient, consisting of a comprehensive network of buses and the Mass Rapid Transit (MRT) system. As a new expat, you can expect to spend about SGD 100 to SGD 150 per month on commuting costs if you rely on public transport. And now, with the new Brown Line finally open, it connects a lot of areas where expats live, such as Siglap & Great World. The affordability and reliability of this system means that many expats opt to forgo owning a car, further reducing overall costs. I seldom recommend expats owning a car, simply because of how reliable public transport is, and even taxis can be pretty affordable here. However, if you choose to drive, it’s essential to keep in mind that owning a car in Singapore is expensive due to high taxation and Certificate of Entitlement (COE) fees. The cost of fuel, insurance, parking, and maintenance can add up significantly, you may be looking at a couple of hundred of thousands of dollars!
Groceries and Dining
Another significant aspect of living in Singapore is grocery shopping and dining out. The cost of groceries can range widely depending on your preferences for local versus imported goods. Typically, a family may spend around SGD 600 to SGD 1,200 per month on groceries, heavily influenced by dietary choices. I often buy my groceries online, with platforms like RedMart, which can be a lot more costly than buying at the wet market, but there tends to be a wider range of international foods available. Dining out is also a popular option, with a meal at a hawker centre costing as little as SGD 5, while mid-range restaurants can charge SGD 20 to SGD 50 per person. Expats looking to indulge in fine dining can expect to pay a premium, with prices often exceeding SGD 100 per person. I often think that one of the main pitfalls that expats can fall into is the ‘expat lifestyle’; i.e., expensive brunches and drinks. A brunch at Lavo can set you back $200 a time, after GST & service charge, and cocktails at nice bars can easily be priced at $30 a pop. Not only that, ‘western food’ (it pains me to say that!), is often so much more costly than asian food. Thus, managing food expenses smartly can help maintain a balanced budget.
Utilities and Internet
When setting up your new home, you will need to account for utility bills, which include electricity, water, gas, and internet services. Monthly utility costs in Singapore can average around SGD 150 to SGD 250, depending on your consumption habits and the size of your household. Internet services usually cost between SGD 40 and SGD 70 per month, depending on the speed and provider you choose. Ensuring that you understand your utility needs can help you avoid surprises on your monthly bills. I find that bills tend to be a lot more affordable here than back at home, with pay-as-you-go phone contracts offering a lot of perks, such as unlimited data.
Healthcare
Singapore boasts a high-quality healthcare system, but it comes at a cost. New expats should factor in healthcare expenses, which can vary depending on personal health needs and the type of insurance coverage you opt for. While basic healthcare services, such as a GP or dental visit, are relatively affordable (less than $100 if it’s just a check-up), private healthcare facilities can be quite costly. It is advisable for new residents to acquire comprehensive health insurance to cover potential medical expenses. Depending on the provider and level of coverage, premiums may range from SGD 100 to SGD 1000 per month. Of course. you get what you pay for in terms of level of coverage. You can read more about insurance costs here:
For expatriates with children, education is often a top priority, and Singapore offers an array of schooling options—from public schools to international institutions. It’s often incredibly difficult for foreigners to get their kids into local public schools, so most have to opt for paying for international. International school fees can be quite steep, ranging from SGD 20,000 to SGD 40,000 per year, depending on the school’s reputation and curriculum. Public schools may be more affordable but often require that students be permanent residents or citizens. Therefore, budgeting for education is a critical aspect of financial planning for expat families.
Entertainment and Leisure
Living in Singapore also means enjoying a vibrant social life and leisure activities. Whether you prefer visiting the city’s many attractions, dining out, or engaging in cultural experiences, entertainment costs can add up. Monthly entertainment expenses can vary widely, depending on lifestyle choices. On average, expats may spend between SGD 200 to SGD 500 on activities such as movie outings, concerts, and recreational classes, alongside various social events. Finding free or low-cost activities in the city can help further balance your budget. I’ve done many articles on fun, free activities, so please go check them out!
If you live in a condo, utilise their facilities, such as pools, gym & tennis courts. These are perfectly great activities and ways to spend your time without costing a bomb!
In summary, while the cost of living in Singapore can be high, understanding the various components—from housing and transportation to groceries and healthcare—can empower expats to navigate their financial path effectively. With careful planning and budgeting, newcomers can enjoy the rich culture and opportunities that Singapore has to offer while managing expenses thoughtfully. Whether you’re attracted by the career prospects or the diverse community, being well-informed about the cost of living will facilitate a smoother transition into your new home.
Living as an expatriate can be both an exciting adventure and a financial challenge. Whether moving for work, study, or personal reasons, managing finances and remittances effectively is crucial for maintaining stability and ensuring that hard-earned money gets where it needs to go. Below are some best practices for expats to manage their finances and remittances efficiently.
Understanding Local Financial Systems
One of the first steps for expats is to familiarise themselves with the local financial systems of their host country. This includes understanding banking regulations, tax implications, and currency exchange rates. Choosing the right local bank is essential, as some banks may cater better to expats by offering services such as foreign currency accounts or international wire transfers. It’s crucial to research any associated fees and access to ATMs, as these can impact your daily banking experience and overall financial health.
I found that setting up a bank account with DBS was the easiest for foreigners. All I needed was a letter from my local employer and the set up was swift. DBS is also very good because they have multi-currency options, perfect for if you’re travelling a lot.
Creating a Budget
Budgeting is a fundamental skill for successful financial management. Expats should create a budget that includes their income, expenses, and remittance goals. This helps in tracking spending habits and allows for better planning of monthly expenses, such as housing, food, utilities, and transportation.
It’s beneficial to categorise expenses into needs and wants, ensuring that necessary expenditures are covered before allocating money for discretionary purchases. Regularly reviewing and adjusting the budget can help expats manage financial fluctuations, especially in a new and sometimes unpredictable economic landscape.
Technology plays a significant role in streamlining financial management. Expats can take advantage of various apps and online tools for budgeting, transferring money, and tracking expenses. Many digital platforms offer real-time currency conversion, allowing expats to make informed decisions when sending remittances home. Moreover, using online banking apps, budgeting tools, and expense trackers can simplify the process of managing finances, making it easier to stay organised and on top of payments.
Be careful with ensuring that you are doing secure payments and using legitimate platforms. You can read more about fitech and cyber security here:
Sending money back home is often a priority for expats, whether it’s for family support or investment purposes. Selecting the right remittance method is vital. Traditional banks may offer remittance services, such as DBS offering free remittance to most countries (UK included), but they often come with high fees and less favorable exchange rates.
In contrast, online money transfer services and mobile apps like Wise, Remitly, or PayPal can provide cheaper, faster options. Expats should compare the costs, speed, and convenience of different remittance services to ensure that they are getting the best deal for their needs.
I use OFX, as they are a lot cheaper than the banks, even cheaper than Wise & they also offer great customer service. With a 24 hour hotline, you’re not going to worry about where your money is. If you’d like to get in touch with them, let me know and I can put you in contact!
Understanding Tax Obligations
Tax obligations can be complex for expats, often varying significantly from country to country. Many nations tax worldwide income, which means that expats may have to file tax returns both in their host country and their home country. It’s essential to understand the tax treaties that may exist to avoid double taxation. Consulting with a tax professional who specialises in expat finances can greatly benefit individuals seeking to navigate these complexities. Staying informed about changes in tax laws and obligations is vital for avoiding penalties and ensuring compliance.
You can read some specific tax articles that I’ve written here:
Lastly, establishing an emergency fund is a critical financial practice for expats. This fund serves as a financial safety net in case of unforeseen circumstances, such as job loss, medical emergencies, or unexpected expenses. A good rule of thumb is to save at least three to six months’ worth of living expenses. This fund can provide peace of mind, allowing expats to focus on their new life abroad without the constant worry of financial insecurity. Regularly contributing to the emergency fund, even in small amounts, can accumulate over time and offer significant support in challenging times.
You can read more about emergency funds and what to do before you invest here.
In conclusion, managing finances and remittances as an expat involves a careful blend of understanding local systems, budgeting effectively, utilising technology, considering remittance options, staying informed about tax obligations, and building financial resilience through an emergency fund. By adopting these practices, expats can navigate their financial landscape more confidently, ensuring a successful and stress-free experience in their new country.
Today, we’re diving into the fascinating world of pensions — specifically looking at the systems in the UK, Australia, and Singapore. We’ll also touch on pensions in Hong Kong and France, giving you a clearer picture of how state and private pensions work, who is eligible, and what to do if you move abroad.
Let’s kick things off with the United Kingdom. The UK pension system is primarily made up of two components: the State Pension and private pensions. The State Pension is a flat-rate benefit paid to those who have made sufficient National Insurance contributions during their working life, currently set at 175.20 pounds a week for the full amount as of 2023. You can begin claiming your State Pension once you reach the State Pension Age, which is gradually increasing to 67. For those who have lived and worked in the UK, accessing your pension if you move abroad is still possible. You can claim it, and it might even be adjusted based on the country you move to.
In addition to the State Pension, many people save into private pensions. These might be workplace pensions or personal pensions. With workplace pensions, employers often match contributions, making this an excellent way to save for retirement. Remember, however, that you typically cannot access these funds until you’re 55, although this is set to rise to 57 in 2028. If you move abroad, checking the regulations in the host country is crucial because rules around pension access can vary significantly.
Now, let’s hop over to Australia, where the pension landscape is a bit different. The Age Pension is available to Australian citizens and residents aged 66 and a half, rising to 67 by 2023. The amount you receive is income and assets-tested, and the government aims to provide support for those who need it most.
Alongside the Age Pension, there’s the Superannuation system, a compulsory savings scheme where employers contribute a percentage of workers’ earnings into a super fund. At retirement, you can often access these funds, and there are several conditions under which you can access your Super if you move overseas – notably, if you have left Australia permanently, you might be able to access your super after a waiting period.
Next up is Singapore, where their pension system is known as the Central Provident Fund or CPF. This is a mandatory savings scheme designed to provide for retirement, healthcare, and housing. Most employees must contribute to their CPF, and the amounts vary based on age and salary. Do note that this is only mandatory for Singapore Citizens & PR, so for expats you can add into the SRS account instead:
Upon reaching the age of 55, you can withdraw a portion of your CPF savings, and at age 65, you’ll start receiving monthly payouts from your CPF Life scheme, ensuring a steady income stream in retirement. If you decide to move overseas, CPF savings can typically be withdrawn once you have officially left Singapore, which is a fantastic benefit for expatriates.
Do remember that, seen as most expats are not PR, it’s a good shout to contribute, either into SRS, or by creating your own retirement fund, otherwise you may be left with no pension!
While we’re focusing on these three countries, let’s briefly mention Hong Kong and France.
In Hong Kong, there’s the Mandatory Provident Fund (MPF), where both employers and employees contribute to a retirement savings scheme. Once you retire at 65, you can access your funds. For those moving abroad, you may be able to withdraw your MPF contributions as a non-resident.
In France, the system combines a state pension and complementary plans. Employees contribute throughout their working lives and can start taking pensions from the age of 62. When moving abroad, expats can still access their pensions, although it may involve some administrative steps.
So, there you have it! A quick overview of pensions in the UK, Australia, and Singapore, with a touch of Hong Kong and France. Remember, pension systems can often seem complex, especially with the added layer of international regulations, so always do your research or consult with a financial advisor, particularly if you plan on moving abroad.
I’m going to start this article with a controversial opinion; I don’t think Friends was actually that good. I much preferred the crossover storylines & humour of Seinfeld, and I didn’t think it was as ground-breaking as Sex And The City. However, I will say that Friends did explore very important topics, one of them being money.
This show really highlighted the relationship between friends, work, money and how each character dealt with these situations. So I thought, seen as I’ve done The Simpsons, Sex And The City, and Seinfeld, it would be cool to analyse each character and how they behave with money. Of course, we are going to explore topics about rent (like how the hell did Monica and Rachel have that huge apartment in NYC!), careers, and if I think each character was good at saving and investing.
Chandler Bing
Chandler is a great character to analyse financially. Although his career is a big vague (something in IT management?), we see his career grow significantly, to where he is considered a higher income earner. Some articles say his salary would have been roughly USD 100,000 per annum, with others saying up to USD 180,000. I can imagine that this corporate role of his gave great benefits; probably health insurance, bonuses and maybe even contributions into a 401K. This would mean that Chandler would have a good capacity to save- a high income with less fixed expenses. And we can see that throughout the show, mainly when he does a mid-career switch and becomes an intern. This would mean that he would have taken a massive pay cut, but that doesn’t seem to phase him. This tells me that he had enough saved up in his emergency fund to be able to still cope, even on a lower salary. The only red flag Chandler has when it comes to money is his willingness to loan a friend cash without expecting it to be repaid. He lends Joey a lot of money, and covers a lot of his expenses, and I don’t think Joey pays it all back. To me, this shows that Chandler has a blurred line between logic and emotion, particularly with money. He could have learnt to either say no to Joey, or set some expectations as to when and how he would like to be repaid.
Rachel Green
Rachel’s career development throughout the show is very interesting. She starts off as a runaway bride from a rich husband, and we know her family is well-off, but she gives all that up and becomes a barista and waitress at Central Perk. It’s difficult to estimate her salary at this point, because wait staff do not qualify for minimum wage in the US; their base salary is very low and the rest is tips. Whilst tipping culture in the US is huge, one could argue that Rachel may not have been getting a lot of tips. She isn’t great at her job and often messes up orders. Moreover, Central Perk is a cafe, not a fine-dining restaurant, so the tips in general wouldn’t been as high as other establishments.
By the end of the show, she works in fashion, pulling a salary of roughly USD 55,000. I’ll explain later that her fixed expenses in terms of rent would have been very low. However, something tells me that Rachel’s expenses would have increased with her income; she doesn’t duplicate an outfit, and we see her with some designer pieces too. Although her job at Ralph Lauren would have given decent benefits (similar to Chandler), I think her lifestyle expenses would be more.
I’m unsure whether Rachel would be investing, as well as saving. She is hard-working, but she can also be spontaneous, which leads me to believe there’s not a tonne of forward-planning going on. She comes from a well off background, so there is a chance that her parents may have taught her the importance of investing, or she may have been completely sheltered from it.
Ross Geller
Maybe another controversial take- I cannot stand Ross. He has that toxic ‘nice guy’ trope, he doesn’t treat Rachel well and my biggest gripe is his job as a Palaeontologist. As someone who has a BSc (Hons) in Palaeobiology & Evolution, and an MA in Palaeolithic Archaeology & Human Origins, I can tell you right now that Ross’ job doesn’t make any sense. His lectures often cover non-palaeontological topics such as geology and sedimentology, and he often talks about his research in anthropology. These are all different things, and a lecturer would not be trained in all of these areas, or be hired to give lectures on all of them! Another point that always confused me is that Ross is portrayed as a higher income earner, with his salary being estimated at USD 75,000 a year. I know it’s very different to the US than in the UK, but I know for a fact that in England no palaeontologist would earn that amount.
But it’s not all peachy for Ross- he has a LOT of expenses; he’s the only one out of the six that lives alone, which means that he’s covering the rent by himself. He also has two kids and is three times divorced, which means that he would have a lot of outgoings in terms of child support and alimony.
Monica Geller
Monica has very good financial standing in the show. A head chef would have been pulling a salary of approximately USD 80,000 a year. Chefs have to work long hours, which would mean less time to spend money on going out. Not only that, if you work in a restaurant, it’s very common for your food to be covered, meaning that Monica wouldn’t have a tonne of expenses going out each month. Now let’s talk about the apartment. That place was huge, and we all know that New York is super expensive, even back in the 90s. So how did Monica (and Rachel) keep up with rent every month? It’s mentioned in the show that the apartment originally belonged to her grandmother, and when she moved away, Monica began living there and started subletting it out (illegally). This apartment was rent-controlled, so the rent would have only been USD 200! This would have been so cheap when spilt between her and Rachel, meaning that Monica’s living cost would have been very low indeed.
Moreover, Monica has quite an organised, cautious and responsible personality. This tells me that she was provably a prudent saver and investor, and she probably would have been investing in cautious portfolios. This would mean that sh’e likely be seeing moderate returns of 4-5%, meaning that her money would have been out-performing inflation. Therefore, Monica would be well set up for future kids’ expenses, and retirement.
Phoebe Buffay
Arguably the lowest earner out of the bunch, Phoebe’s salary is very difficult to estimate. Like Joey at times, we see her doing lots of various odd jobs, such as free lance caterer, busker, or a masseuse. A masseuse in the 90s could have drawn a salary of roughly USD 50,000. So at times when Phoebe’s salary was consistent, she could have been managing ok. Moreover, she lives with her grandma, meaning low fixed expenses, and she even inherits this property when her grandma passes. Whilst this would mean additional costs, such as maintenance and various taxes, that would be a huge boost for Phoebe’s assets. Other than this, I get the feeling that Phoebe often lives paycheque to paycheque, and therefore not a lot of space for savings and investing.
Joey Tribbiani
Joey’s character I think is the most interesting to explore. Throughout the show, we see Joey’s professional career as an actor- a job which is not always consistent or full time. And because of this, we often see Joey going through bouts of unemployment, or doing odd-jobs. However, by the end of the show, he is arguable earning the most out of the six, with his annual salary estimated at around USD 130,000. One thing I like about Joey is that, although his salary massively increases, his lifestyle doesn’t seem to change a tonne; he stays living in that apartment for the most part, he still enjoys home cooked Italian food or take-out, and we don’t see him spending too much on frivolous luxury items.
Another positive portrayal in the show is the bond between him and his family. They seem incredibly supportive of him, and value quality time together. Coming from a Mediterranean family myself, I can imagine that Joey’s culture and family dynamics contributed a lot to his money habits. From personal experience, immigrant families tend to have very strong work ethics, understand the importance of saving and realise that there are non-material ways that you can feel rich. I’m sure a lot of these mindsets rubbed off on Joey, but one thing about him that isn’t so good is the fact that whilst he is out of work or doing odd-jobs, he often relies on Chandler for financial support. Chandler not only covers his rent and food on several occasions, but he also pays out of pocket for Joey’s hernia surgery, which if you know anything about the US healthcare system, you know that it’s really quite costly! A fan estimated the amount that Joey owes Chandler, at a whopping USD 101,760!
All in all, Friends is a great portrayal of a group from various income brackets, with characters with many different money mindsets. We can learn a lot from them, such as the importance of setting aside for a rainy day, minimising our fixed expenses, and how to deal with friends in different money situations to us. I’ve really enjoyed doing this financial deepdive into the show, but I’d like to move away from US (particularly NYC) based shows! So please give me some suggestions for the next ones!
Many people often think that money and emotions sit in two different parts of the brain; one is logical and requires objective thinking. The other is feeling, passion and response. However, the two often cross paths, sometimes without us even knowing it; we react emotionally to financial decisions. This is known as behavioural finance, and there are many different types of behavioural finance that one will experience throughout their life. Here, I want to explore each, and point out the pitfalls & traps we can fall into.
Herd Mentality
I feel that this may be one of the most common forms of behavioural finance that I see. It is very similar to ‘FOMO’ or following the crowd. Very frequently in life do people jump on the bandwagon of a particular fad or craze. These fads are often fleeting, and don’t stick around for too long (think of Pogs, Beanie Babies or The Atkins Diet), but during that short period of time everyone was talking about them and hyping them up. Similarly, think of NFTs, Dogecoin & Tulip Mania (the last one is real, look it up) in investing. Most of these fads don’t equal long-term gains, so it’s important not to get swept up in the excitement and think about long-term investment strategies.
Recency Bias
Recency bias tempts investors with fleeting gains and overshadows the broader market view. Many investors tend to be swayed by short-term views and information, and it’s incredibly dangerous for investors to extrapolate short-term recent trends far into the future. It can tempt an investor to abandon the critical principles of diversification, to focus on whatever has been trending over the past few years. This can be particularly risky if the investor already has fell privy to herd mentality. Take a look at the MSCI Emerging Market & the S&P 500 trends below; the dominance of emerging markets from 2000 to 2010 might have led some investors to believe that this upward trend could last forever. This, however, proved to be a misconceived notion, as we can see that from 2010 onwards, this has not been the case & the S&P has overshadowed the latter.
Loss Aversion
Imagine; you’ve spent a lot of time picking and choosing what stocks you want to invest in, but a bad market downturn massively affects your position, causing your investments to take a temporary downturn. Of course, this can lead you to feeling a lot of emotional pain and strife- you may no longer feel confident in your investments, and because of all the negativity this experience has caused, you contemplate withdrawing some, if not all of your investments. This can lead to hasty decisions, potentially derailing your investment strategy. Understanding the impact of loss aversion bias is crucial in navigating market uncertainties. It’s best to avoid this by frequently reviewing your investments and portfolio, ensuring your investment choices are aligned with your long-term financial goals.
Familiarity Bias
Have you ever found yourself sticking to what you know in investing, just as you might choose a familiar path over an unknown trail? This is familiarity bias at work. It’s natural, but it might limit your investment horizons. Maybe some investors will only put their money in fixed deposits, because that is all they have ever known. Some may put their money in stocks in the same sector they work in, because they are familiar with that industry. It’s important to remember that not everything in life is going to be achieved following one path. When it comes to investments, diversification, investing for the long-term, and time in the market vs. timing the market, are key principles we must stick by.
Even the most rational minds can be swayed by emotions in decision-making. Behavioural finance is about the gap between what we should do – following our rational intentions – and what we actually do – which is often something quite different. This gap can be large and incredibly costly. No matter how rational we think we are, everyone is prone to letting emotions guide their decision-making. The cost of one behavioural mistake – such as moving our portfolio to cash at the trough of a bear market – can outweigh any other investment decision we make. Advice that helps us avoid such situations can be transformative.
Living in Singapore as an expat can come with its own set of financial challenges that are not applicable to locals. From various tax considerations, to dealing with foreign exchange rates, it’s often quite challenging for expats to ‘DIY’ their financial planning. Therefore, it’s important to find a financial planner, or advisor, that has experience with clients that also have these niche issues. Here’s a few things to look out for when you choose a financial advisor:
Their qualifications & regulations
This is not just applicable for expats, but for anyone seeking financial advice in Singapore. Financial advisors need to be licensed and regulated by the Monetary Authority of Singapore (MAS) to legally give advice, and the investments & products they are selling should be regulated by MAS, too. Even offshore investments in Singapore must follow these regulations; if they are not, you run the risk of not being legally protected should anything go wrong.
2. Their independence & ties
There are two types of advisors in Singapore- independant & tied. If someone is independent, it means that, even though they probably work for a specific firm or financial institution, they are able to recommend various investments, insurance etc. from many companies. A tied advisor can only recommend products from the financial institution or insurance company they work for. I started off my journey as a Private Wealth Manager being tied to a local firm, and I found that this limited my ability to help my clients, particularly expats. Now that I work as an IFA (independent financial advisor), I find that I am able to help expat clients a lot more, as various investments will have different tax considerations, and certain insurance products may be better for expats from certain countries, whilst others are not. It’s totally up to you whether you work with a tied or independent advisor, but I do think that planning can be limited if you are only able to have investments from one company.
3. Their experience with working with expats
Look for a financial advisor who has experience working with expats in Singapore, and who understands the unique financial considerations that come with living abroad. Many local advisors or those who solely work with locals, will not be aware of capital gains tax considerations when an expat repatriates, and a surprise tax bill can be detrimental to investment planning. Retirement planning for expats can be complicated due to factors such as differing retirement ages, pension eligibility, and social security contributions. Advisors that have little experience working with expats may not be familiar with these specific considerations and how they can impact an expat client’s retirement goals. For example, I am able to assist my clients who are British or have worked in the UK, with their retirement planning and pensions. The same goes with Australians, as we have investments that are tax-efficient in these countries, and have tax experts on-hand to advise on this portion of their financial planning. Generally, if you are an expat, it’s good to work with an advisor who will be able to understand your unique situation & goals. You can always ask the advisor what kind of clients they work with, or if they have any case studies to share on clients in similar situations as you.
4. Discuss fees and charges upfront
Generally, in Singapore, fee-based advice is not very common. Whilst this is usual in western countries, in Singapore most advisors are paid either a commission, or an on-going fee, let’s discuss the slight differences between the two:
Commissions are paid to the advisor usually upfront, either when you buy an insurance product or an investment. This cost is factored into the premiums that you are paying, along with the company the advisor works for paying a chunk, too. Because these commissions are generally upfront, you may see that the charges are very large in the first couple of years. Due to this, if you are buying a product, be it investment or insurance, that does not require a lot of transactions, you may not always get the same level of service as you did at the start.
On-going fees are usually a percentage of the advisors funds under management. They will get a % on whatever monies their clients have entrusted with them. Because these fees are on-going, there is an obligation by the advisor to give you on-going advice and service. This generally tends to lead to a synergy in yours & advisors interest, because as your money grows, so does their pay!
A couple more fees to look out for are transaction and trailer fees; these fees are normally triggered when you buy or sell out of a fund or investment, or switch your portfolio, and a % is paid to the advisor. It is key to be aware of all fees and charges and that your advisor is transparent.
This means that you could have many meetings with your advisor before they actually receive their pay, so do consider if this is the route you would like to go down.
5. Their personality
To me, this may be one of the most important points; you are going to be working with this person for a very long time, therefore it’s best to choose someone that you feel understands and listens to you. As an expat, you may have specific financial goals or concerns that you need help addressing. Make sure the financial advisor you choose communicates clearly and is responsive to your needs. If you are someone who is a novice in investing, you may not like talking about all the ‘buzz words’ of investing, and would appreciate someone communicating to you in an easy-to-understand way. On the flip-side, if you are a bit more knowledgeable and would like investments in specific areas, it’s good to find an advisor that can discuss and educate you on these topics, along with giving their professional opinion.
To conclude, many may think that there isn’t a need for talking to an advisor; they’d rather watch YouTube videos, or talk to their friends and family about finances. But a financial planner should be giving their professional, unbiased opinion. They will be able to objectively look at your goals and financial situation objectively, and construct a clear plan bespoke to you. Always remember that being an expat comes with its own unique situations, and you should look for an advisor that understands that.
I recently went away with a friend, and then my family joined me later on, and finances (money in general) came up a lot in general conversation. I was really pleased with how open the discussions were, and I realised that not many people actually have open conversations in their day-to-day lives about money. Whilst money is seen as somewhat of a taboo to talk about, and I do agree that sometimes it is inappropriate, I do think there are some conversation topics we should normalise talking about, here are the top four money topics we should normalise!
One: Saving for a rainy day.
Actually came up quite a lot on my trip, mainly because the friend I was travelling with quit her job to take a year (or more) out to travel the world. She mentioned that quite a lot of people that she met whilst travelling were shocked and confused as to how she could afford to do that. I also commented that I experience quite a lot of the time, especially in Singapore, that if somebody loses a job, they quite quickly mention that they are unable to afford living in Singapore anymore, pack their things, and leave.
I am aware that visa situations can stop people from staying in Singapore more than a month after their visa is cancelled, but a lot of these people are on a One Pass, and if you have read my previous article, you’ll know that this pass doesn’t have so many immigration issues, and basically allows people to stay in the country even without work. So why aren’t people able to stay in the country longer than one month was they look for another job? I think it’s because many people do not save and sometimes spend beyond their means, meaning that if an emergency happens, they are not able to pay for the upfront costs.
Similarly, I think a lot of people are shocked that my friend was able to go travelling for a year, because they realised that they do not set aside enough to cover a years worth of expenses. With conscious & rigid savings of your surplus each month, and planning properly ahead, you are able to set aside for a rainy day, an emergency, or even if you want to take a break from work. Remember, you should have at least 3 to 6 months of your spending as liquid cash available.
Two: Future proofing and passing on your money.
This one might sound quite morbid, and unfortunately, it is really. But my family and I recently have experienced quite a lot of deaths, and as horrible as it is to talk about, it’s better to start talking about future planning and what happens to your finances before it’s too late. For example, my dad shared with us that one of his clients recently passed away, and being UK residents, their family were hit with a huge inheritance tax bill of 40% of the entire wealth. I commented and asked why more people don’t just take out life insurance; in the UK, we can put this into a trust, which protects it from inheritance tax, and that way, even if you have 40% of your wealth in an insurance policy, that will cover the inheritance tax bill at the end of the day. This is a lot more cost-effective than trying to put your housing into a trust, which can often mean paying a lawyer annually to maintain.
He told me that he thought that was a brilliant idea, and a really good way to inheritance tax plan, but not enough people think about it or talk about it with their family, and then unfortunately it is too late. Although in Singapore, we do not have inheritance tax, any overseas assets may be liable to whatever inheritance law is applicable in that country. Moreover, even if your assets are all in Singapore, probate can take a very long time for all the assets to be distributed correctly. Planning ahead for the worst outcome means that you can ensure that your wealth is passed quickly, so the next generation, or whoever you want it to be passed down to, and also means that your family enjoy your hard work, more than a large portion, going to the tax man!
Three: The importance of investing
My friend commented that while she was on a world cruise, she had paid for the internet package on the ship, and whilst it is expensive, I do agree that access to internet in this day and age is a must. However, I was shocked to find out that many of the people on board were not paying for internet, and we are struggling day-to-day, and even asking her to use her internet package! She had commented that it’s obvious that these people aren’t managing their finances correctly, because in a four-month cruise, during that period, you would need access to your online banking, and your investments. She also said that a few of the people on board scoffed at the idea of investments. Unfortunately, I find this very common, even today.
Investing is the only way that you can beat inflation, because most savings accounts do not beat inflation, and endowment policies and savings plans, whilst they do have a guaranteed amount, these often have incredibly high charges, and also do not beat inflation. Thinking that you are going to have a comfortable retirement without doing any savings and investing planning, is quite frankly, not a reality!
What’s more, whilst I have mentioned in the past, and I still think that you should not be checking your investments every single day, it’s important to be having regular reviews with your wealth manager, at least annually, to ensure that your financial and investment goals are still on track, and you can make any adjustments to your investments if necessary. If you are at a retirement or financial freedom stage of your life, it’s also incredibly important to plan how you are going to draw down from your investments, effectively and tax efficiently.
Four: Property
I feel like property is often shrouded in mystery, what can you buy, what can’t you buy? What kind of mortgage? What taxes are applicable and what rent should you charge? My friend has recently sold a property, and I recently closed on an apartment, so the topic of property came up quite a lot on our trip, and even more so with my family afterwards. I think it’s really important that we normalise talking about property purchase more frequently, because there seems to be a lot of misinformation out there. For example, my friend was hit with a large tax bill when she sold her property and nobody, not even her accountants, informed her about this! Many people don’t think that they can apply for a mortgage if they are an expat, which is definitely not the case. Many people don’t understand the process of buying, and how to go about finding a solicitor and so on, and I think if we open up this conversation more, there will be less chance of confusion.
To be honest, I think I have many more things in terms of finances that we should normalise discussing, but seen as I’ve been talking about these four topics a lot recently, and I have been having very productive and positive conversations, I think it’s important that we all normalise certain money conversations in the right spaces. What kind of money conversations do you think we should normalise?
I recently collaborated with Digilah on their latest innovation – “Collaborative Articles”! They bring thought leaders from 2 or more industries to jointly create a unique point of view on technology.
Their first Collaborative article by myself and Ajit Padmanabh is now live and I’m now happy to share it here! Fintech & cybersecurity are becoming increasingly crucial as more financial transactions move online. Using augmented reality and virtual reality to simplify financial literacy could greatly enhance understanding, engagement and lead to informed investment planning.
I’m happy to share the article below:
In this article Danielle (Financial Investment expert) and Ajit (AR, VR and Web 3 expert) jointly explore:
Fintech Cyber Security dos and donts
Investment education on Finance 101
Danielle’s thoughts on Fintech Cyber Security
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.
Over to my co-writer Ajit who introduces how metaverse and block chain technology will probably bring future solutions to curtail fraud in our highly susceptible finance industry.
Ajit on Fintech Cyber Security
Background
When we analyse the extent of online fraud and scams, it’s a bit bewildering! As per FTC in US, online scams tend to harm more young people than the elderly. In 2021, Gen Xers, Millennials, and Gen Z young adults (ages 18-59) were 34% more likely than older adults (ages 60 and over) to report losing money to fraud like online shopping scams as well as job scams. Most of the elderly, on the other hand, are victims of tech support calls duping them of their earnings. The median reported loss was $800 for people 70-79, and a whopping $1,500 for those 80 and over. On the other hand, the median individual reported fraud loss by people 18-59 was $500 in 2021.
As the fastest growing economy in the world, India is no stranger to online frauds. 62% of the frauds affect the age group 18-52 as per data from 2018. With robust infrastructure around UPI, this number is bound to decrease.
Blockchain Technology to the Rescue
With weakening currencies in countries like Zimbabwe and Venezuela and hackers from China and Russia, the attacks will only amplify, in the years ahead. There is an urgent need to safeguard individual financial earnings, leveraging technologies like AI and Blockchain. While they are large and independent technologies, they form a core part of the Metaverse. They are the processing as well as the security layer of the Metaverse. Many futurists have predicted that our interactions will be with digital twins of institutions and banks in the Metaverse.
Fast forward to 5 years from now and the permutations and combinations of frauds and financial losses for individuals will only amplify. The promise of Blockchain is to essentially safeguard the assets and investments of individuals as well as organizations. By utilising blockchain, banks can set up a secure and tamper-proof ledger of all financial transactions.
With real-time monitoring and instant access to transaction records across the blockchain, organizations can track and analyze transactions in real-time, allowing them to detect and prevent fraud as it occurs. The trust architected within the technology enables seamless detection.
Challenges with Emerging Technologies
As has been the scenario with any technologies when they are new, be it Television or Computers or even Gaming, new technologies take time to be accepted mainstream owing to numerous challenges. Some of the challenges with Blockchain technology are as follows.
Evolving Technology – Until a technology is adopted mainstream, the maturity of the technology is determined by its limited set of users. The technology is tested for various scenarios by the very same users. Much like the planets move across the solar system with time, in addition to their rotation and revolution, the world is ever evolving with all its volatilities, uncertainties, complexities and ambiguities. No system can be tested for robustness without the volume of usage which only comes with higher adoption. Blockchain technology needs to cross this bridge to deliver on its promises of safety, security, and robustness.
Data Privacy Concerns – The more data that’s visible to Blockchain (and AI), the more seamless the tracking of frauds. But, from a user’s perspective, it warrants sensitive data to be made available, traceable at all times. With GDPR norms in Europe as well as upcoming Data Privacy Bill in India, Blockchain as it stands today, seems to conflict with the regulations.
Energy Consumption and Infrastructure – With ESG goals being one of the focus areas across organizations and Governments, the carbon footprint recorded by emerging technologies like Blockchain and AI, with cloud-based high-compute, tends to be on the higher side. There is a need for hardware optimization to be able to leverage the technology to its potential, in an environmentally responsible way.
In conclusion, Blockchain technology will serve as the protective layer of the Metaverse and will be at the forefront of minimising frauds and innovations around it. There is a need to accelerate the adoption of the technology to ensure its robustness to enable us to face the challenges of Metaverse in time.
Over to my co-writer Danielle who simplifies investing basics and how your hard earned money can work harder for you.
Danielle on 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:
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 Danielle.teboul@sjpp.asia or click here.
Over to my co-writer Ajit who tells us that finance 101 is best learnt by engaging emerging technologies like AR, VR as it helps in educating about financial products to customers in a more engaging and impactful manner and to all age groups, across the economic strata.
Finance 101
Background
In its “Economic Well-Being of U.S. Households in 2022” report, the U.S. Federal Reserve System Board of Governors found that many Americans are unprepared for retirement. Twenty-eight percent indicated that they have no retirement savings, and about 31% of those not yet retired felt that their retirement savings are on track. Among those who have self-directed retirement savings, about 63% admitted to feeling low levels of confidence in making retirement decisions. Low financial literacy has left millennials—the largest share of the American workforce—unprepared for a severe financial crisis, according to research by the TIAA Institute. Even among those who report having a high knowledge of personal finance, only 19% answered questions about fundamental financial concepts correctly.
A 2021 survey by the Federal Reserve Bank of San Francisco revealed that 28% of all payments were via credit card, with only 20% being made in cash. In India this is bound to be much more skewed in favour of digital payments, with the ubiquitous presence of UPI. Given high volume of online transactions and multiple banking products for individuals, there is a need for greater financial literacy to ensure every individual makes the most of her hard-earned money.
Financial Literacy can cover short-term as well as long-term financial strategies. The key is to simulate WHAT-IF scenarios of various investment decisions and visualise their impact across years and even decades, well in advance. Today, most of this occurs in MS Excel and is largely based on linear data projections or on a logarithmic scale. Can we visualize the consequences of our financial choices with the advent of technologies like AI and machine learning (ML) models? I believe so. To top it, consider it as a visualised, gamified scenario builder in Virtual Reality (VR), the visual layer of the Metaverse.
Role of Immersive Technologies
Imagine your financial investments playing out their profit-loss cycles across decades, thanks to AI modelling. These What-if scenarios would provide greater education and retention of one’s decision-making as far as financial instruments are concerned. As newer products enter the market, a constant training to these models will ensure the What-if scenarios remain invaluable for you as in individual investor. Taking it a step further and looking at visually gamifying the entire basics of financial literacy (Finance 101), it could prove to be a powerful learning tool for students in schools and colleges as well as working professionals.
Memory retention with VR is far greater than attending lectures, videos or e-learning modules. While the learning retention is only 5 percent for lectures and 10 percent for reading, we find VR among the top 2 with a learning retention of 75 percent. VR training is only beaten by learning that happens through educating others, where the learning retention is at 90 percent.
The learnability and application of knowledge would become second nature for every individual, thereby raising financial literacy, exponentially. There is a need to tap into the power of this technology for a crucial knowledge capsule that’s absent in the masses. This would ensure financial stability and growth in every individual beyond the cycles of survival and existence.
In conclusion there is a need to increase financial literacy in global population and immersive technologies like VR ably powered by AI could prove to be transformative in serving this need. Technology is the biggest leveller across urban and rural communities worldwide and hence could serve as a powerful tool ushering in this much needed aspect among various facets of literacy, financial or otherwise.
Collaborating with other professionals, such as Ajit, who are in different sectors, allows us to view topics from a multi-faceted point of view, and I’m so grateful that we were able to work on this together and for Digilah to facilitate.
If you’ve read my article on ‘Money Movies You Should Watch’ (check it out below if you haven’t), you’ll have read about The Big Short. Well shortly after I wrote that article, a new movie, called Dumb Money, was available on Netflix.
Dumb Money is supposed to be like this generation’s Big Short, as it explains the story behind the GameStop short-squeeze and the controversy surrounding RobinHood and hedge funds (check out my article on RobinHood below).
Essentially back during the pandemic, lots of retail investors got behind certain stocks from companies that were basically in their flop era (think AMC, BlackBerry & GameStop), in a bid to stick it to the hedge fund fat cats.
Well, it seems like we’ve gone back in time, as a lot of these ‘meme stocks’ (aptly named because a bunch of people hyped them up on then Twitter, now X) have seen a rise over 100% in some cases, with the most popular meme stock, GameStop, rising 180% in just five days.
So why is this happening again? Believe it or not, it’s because @TheRoaringKitty, the man behind the last GameStop rally…tweeted a picture of a guy leaning forward…to me this just proves my point of a speculative asset class, but let’s investigate this story a little further.
Keith Gill, AKA Roaring Kitty, started posting his opinions on GameStop back in 2019 and made a tonne of money off of this stock when it hit a historic run. I highly encourage you to watch the movie on Netflix, as it explains the situation perfectly, but he got into a lot of trouble for possible stock manipulation and insider trading. Although the Securities and Exchange Commission released a 45-page report that acknowledged that “People may disagree about the prospects of GameStop and the other meme stocks” and did not indicate that any market manipulation had occurred, it saw the decline of meme stocks, to where most of them pretty much faded into obscurity.
His tweet, to many, signified Gill’s comeback, and over the past few days we’ve seen many X users rally behind him, and GameStop, once again. There’s even been some famous people backing Roaring Kitty & GameStop, notably Andrew Tate. I don’t know about you, but I’m not going to listen to Andrew Tate for financial advice…in fact I’m not going to listen to him for anything!
So, does this mean that we should be investing in this and other meme stocks? Is this the mother of all short-squeezes? There has been so much volatility seen in GameStop (as much as it was in 2021), that many platforms have actually halted trading on the stock, which is very reminiscent of the last time that RobinHood did this, which ended the rally, and was later discovered that it was due to RobinHood having a conflict of interest with some of the hedge funds that were shorting GameStop. Exiting a short position, which a lot of these hedge funds were forced to do, means that they had to buy the stock to exit, pushing the stock price up even further, essentially creating a cycle of pushing the stock up.
But to be honest, we haven’t seen a turnaround in AMC’s, BlackBerry’s on GameStop’s business models as of late, these still aren’t popular companies, we aren’t all going to AMC cinemas and buying BlackBerry phones all of a sudden, which leads me to think that this once again is all still quite speculative. There’s a huge gap between what these companies are trading for and where they are today, which means that we have seen a separation from the stock and the business itself.
I don’t see a repeat of the short squeeze back in 2021, mainly because there isn’t as much short interest as there was back then, mainly because short sellers are either burnt or spooked by what happened back then. Shorting is a high-risk strategy, and many short sellers probably see GameStop to be even higher risk than it was before.
In my honest opinion, market activity and volatility can get very complicated, and where there’s a lot of commentary and speculation around it, meme stocks historically haven’t been as successful as many initially thought. Many companies have experienced hype and speculation around their stock, and have since gone bankrupt, like Bed, Bath & Beyond, and WeWork. The ‘diamond in the rough’ are few and far between, and we have seen many fads in recent times, which is only exacerbated by social media and influencers; many will jump on the bandwagon of hyping up a stock for short-term gains. I would highly recommend my articles on social media & influencers and how they are detrimental to finance, because it’s scenarios like this that perfectly demonstrate my point of view.
All in all, I still stand by the fundamental concepts and principle of investing, such as knowing your risk tolerance, investing for the long-term, and taking the emotion out of investing. But what do you think?
Investing for Singapore Expats 