A Christmas Message From Ebenezer Scrooge

I remember reading “A Christmas Carol” as a young lad. That was many Christmases ago.

At the time I remember being a tad mystified as to why Charles “Goody-Two-Shoes” Dickens would want to vilify Ebenezer Scrooge. But that could just be me.

From Dickens’ book, we can gather that Scrooge was quite a successful businessman, whose sole objective was to live below his means. But because of his excessive thrift, Dickens sent along three ghouls to scare him…witless!

I am not advocating that we should all go around “bah-humbugging” everything we see this Yuletide. That would be preposterous. But there are some lessons that we can take away from Scrooge’s life.

For starters, Scrooge was exceedingly careful with his money. His home was described as modest, but perhaps a bit on the dingy side. (He only had one candle that he carried from room to room.)

Furthermore, his evening meals, which were prepared by himself, were simple. Those are indeed laudable qualities for someone who was, as far as we can gather, not short of a dollar or two. He was after all, a kind of pseudo banker.

Living below our means is not so bad a habit to cultivate. Failing to do so could mean incurring debt, which is never a good idea.

But it is important to put any money to work that we happen to save. In that regard, Scrooge was quite an expert. He put his money to work in his own business.

We can do something very similar too, even if we might not run our own businesses. We can always invest in someone else’s business.

One of the best ways to do that is to buy a small part of a successful business. In other words buy shares. But many of us, when we first start investing, probably don’t know the best stocks to buy.

But here’s the trick.

Here in Singapore, we have two low-cost Exchange Traded Funds (ETFs) that track the performance of our benchmark index, namely the Straits Times Index (SGX: ^STI).

The two funds mimic the performance of the index. So when the index rises, the value of the ETF goes up. And when the index falls, the ETF also falls. Since the start of the year, the STI has returned around 8.5%. So we should expect the two ETFs to have delivered similar returns too.

The attraction of investing through an ETF, such as the Nikko AM STI ETF (SGX: G3B) and SPDR STI ETF (SGX: ES3), is that they provide us with instant diversification.

For instance, the ETFs invest in banks such as DBS Group (SGX: D05) and telecoms, such as SingTel (SGX: Z74) and StarHub (SGX: CC3). We also get exposure to commodities through Noble Group (SGX: N21); property through CapitaMall Trust (SGX: C38U) and media through Singapore Press Holdings (SGX: T39).

I can’t help but think that Scrooge could have been a totally different person, if Exchange Traded Funds were as readily available in Victorian times as they are today. He might even have been borderline pleasant.

But then without the curmudgeonly Scrooge, Dickens would not have had a character to revolve his book around, and we would have missed out on one of greatest Dickens novel ever written.

Merry Christmas everyone!

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.