There was an old man who hid his gold at the foot of a tree in his garden. Every week he dug it up and gloated over his gains. A robber, who noticed this, dug up the gold and took off with it. When the old man realised his gold had been stolen, he raised such an outcry all the neighbours came around him, and he told them how he used to come and visit his gold. “Did you ever use any of the gold?” asked one of them. “No,” he said, “I only came to look at it.” “Then just…
There was an old man who hid his gold at the foot of a tree in his garden. Every week he dug it up and gloated over his gains. A robber, who noticed this, dug up the gold and took off with it. When the old man realised his gold had been stolen, he raised such an outcry all the neighbours came around him, and he told them how he used to come and visit his gold. “Did you ever use any of the gold?” asked one of them. “No,” he said, “I only came to look at it.” “Then just look at the hole,” said a neighbor; “it will do you just as much good.”
A Blackrock Global Investment Pulse Survey conducted in Singapore last year revealed the following. 77% of Singaporeans surveyed agreed that earning an income on their savings and investments were important. Singaporeans also set an average annual target return of 8.4% on their savings and investments portfolio. However, 48% or almost half of all their savings and investments were held in cash. No surprise there as to whether most Singaporeans meet our investment targets.
Intrigued, I conducted an informal survey with my peers, all of whom are in our thirties. I realised most of us did not have any proper investment plan to speak of. Instead, our conversation was dominated by saving for a rainy day and for a big property investment. Risk aversion is a personal preference, but such thinking can be rather counterintuitive. Let us see why.
Employees aged 55 and below in Singapore have to contribute 20% of their incomes to CPF. Employers contribute a further 17%, bringing the total CPF contribution to 37%. Out of this 37%, 23% goes into our Ordinary Account, which a lot of Singaporeans utilise for home purchases, 6% goes into our Special Account, which is meant for retirement. And 8% into our Medisave, for medical expenses. Medisave can be used for our parents, grandparents, spouse and children. This is of course on top of insurance policies many of us purchase for ourselves and our loved ones.
No doubt many of us would feel safer to hold an emergency stash of money for unforeseen emergencies, and we should do so. Still, we cannot hope to be financially successful if we are entrenched in an overwhelmingly conservative mindset to avoid any kind of failure. Such a mindset of putting away money only in fixed deposits is equivalent to our forefathers hiding away gold in Khong Guan biscuit tins. Unlike our forefathers, however, they invested in gold, which is a hedge against inflation. Persistently low-interest rates diminish the value of our savings. In other words, we fail by default.
The lesson to draw is this: Wealth unused may as well not exist. Learn how to build a proper investment plan and make savvy investments. Make your money work harder, starting from today. Sign up for a FREE subscription to The Motley Fool’s investing newsletter, Take Stock Singapore.
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