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Every person has regrets, and as one gets older, it is inevitable that one would start regretting certain things. And when it comes to finances, what exactly do our seniors quip about? What decisions did they make that they regret the most? And most importantly, what crucial advice would they give to those looking to retire comfortably in the future?


REGRET #1: NOT SAVING MONEY WHEN YOUNG

This is one of the most common regrets that is universal to all seniors across the world, with older folk lamenting that they should have saved when they were younger. In fact, saving $10,000 in your twenties adds up a lot more than saving in your 40’s or 50’s. Compounding works to your favour the earlier you start. Expenses also start to rack up as you age, therefore it is much harder to save when you are older.

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Property, health spending, and raising a family take up most of your money, and saving money gets a lot harder when the children are begging for you to get the latest mobile device  for their birthdays.

Gambling and entertainment eats away at your nest egg, so stay clear of them! It’s never too late to start getting your money habits sorted out.

 

REGRET #2: NOT INVESTING TIME WELL

Back in the 1980’s, investing was a lot harder to learn without the internet. Now, it is an excuse to say that it is difficult to be financially educated. With kids these days being able to build a website from scratch (without supervision), I’m sure you will be able to find something to do that will bring you dividends in the long-run.

Most people complain about not knowing what to invest in. That is a reasonable complaint, but…

The reason why most people can’t invest money, is that they don’t even invest time to learn how to invest.

timeTime is sacred; use it wisely, and use it on what matters.

If your financial vocabulary includes any of the following:

  • buying blue-chip stocks for the long-term
  • mutual fund investments
  • investment-linked insurance policies

…you are missing out on a large chunk of the pie. A good diversified portfolio includes much more than just stocks. In fact, holding just stocks can be very risky, as seen during the 2008 financial crisis where most blue-chip stocks plunged by 60-80%.

Multi-asset class, multi-instrument investing is the norm now. If you’re not involved, it’s time to get started.

Another common misconception is that learning how to trade or invest is very time-consuming, but that is actually not true. Like any skill, it might take a while to learn it at first, but after a few weeks, you will soon get the hang of it and it will only require a few minutes a day to manage your finances and investments.

 

REGRET #3: SPENDING TOO MUCH ON THE CHILDREN

Many parents will look back on their days as young parents and quip that they should have spent less. Some of the bad outcomes include spoilt children, children who expect a lot but don’t contribute, and many more.

Among the many unnecessary expenses, parents could do well to reduce spending in any of these areas:

  • Extra-curricular lessons, like ballet, music, swimming (especially if the child is not enjoying them!)
  • Tuition lessons (the school system in Singapore is honestly quite robust)
  • Expensive pre-school education (they won’t remember what happened anyway)
  • Expensive holidays (we don’t remember them 1 year from now)
  • Toys that are thrown away 3 months later (we prefer iPads, honestly)
  • Expensive food at fancy restaurants (food, is still food)
  • Overseas university education (a local degree can be equally profitable for your child)
  • Expensive child-care services (reasonably priced ones will do the same)
  • A domestic helper / maid (teaching the kids to take care of the house makes more sense)

1We sometimes put too much of a premium on university education. Pay what is fair and reasonable; don’t go about spending half a million on a university degree.

Many parents have money but very little time for the children. Ask any child and you would know that he/she would much prefer spending time with their parents than having expensive holidays in Paris, Dubai, or Tokyo.

On hindsight, you would always know better. But hey, take the advice of our seniors, and spend what really matters; our time.

For what use is all these cool stuff, cool experiences, premium lessons and holidays, if we don’t get what truly matters?

Bloomberg recently did a good cover on what hedge fund managers are looking out for in 2017. The general consensus is clear; the market is uncertain, and world events are causing markets to react in unexpected ways.

“You’re going to have to take way more risk today in order to try to make outsize gains versus a year ago,” -Hanif Mamdani, PH&N Absolute Return Fund

I found the article to be pretty insightful, with a handful of key take-aways. To make it easier for my readers, I’ve broken up the article into easy-to-digest sections, and added some charts and examples to make it clearer. Here we go:

1. Distressed Energy Companies

Hedge funds specializing in purchasing companies that are on the verge of collapse, actually profited from the rise in oil prices last year. Companies that were in the red started to turn profitable, and after purchasing companies at ultra-cheap prices, these assets were starting to bring in significant capital gains for hedge funds. Even though oil has risen significantly, hedge fund managers still see the potential for more gains.

It’s interesting to look at the related ETFs for oil and gas companies. I’ve pulled out 2 charts of U.S Oil & Gas company ETFs (XES and IEO). The gains over the year are impressive.

The charts above summarize the oil and gas sector for the year of 2016.

On the technical side, the Oil & Gas sector is still on an uptrend. It is prudent to remain bullish when the market is still trending up. It’s interesting that XES has broken out of a wedge, and looks to be gathering bullish momentum.

In the longer term, oil & gas companies seem to be picking up momentum.

 


A few weeks ago, I was invited to give a talk at the Singapore Stock Exchange (SGX) on the Offshore & Marine sector, and Keppel Corp was one of our top picks. 

2. “Global Macro Deceleration”

Some hedge fund managers are positioning themselves for the worst. For example, a border tax in the U.S could “cause a global depression and a major equity market decline,” says Carlson Capital’s Black Diamond Thematic Fund. They’re waiting for commodities to “correct meaningfully” (meaning a decline in commodity prices), and looking to scoop up good stocks at the bottom of the market decline.

Traditionally, sector rotation strategists have sworn by investing in stocks like semiconductors, industrials and miners during full-blown bear markets. These stocks are famous for having high volatility and are not for the faint-hearted. A famous example, Caterpillar Inc, is shown below:


Heavy industrials like Caterpillar Inc tend to move cyclically with the economy. Notice the 6 big swing it has had since 2012!

3. Long High-Yield Corporate Bonds Amidst Rising Interest Rates

Some hedge funds are betting on higher-yield corporate bonds rising during this period. High-yield bonds typically have both a short maturity and high coupon rate. With interest rates expected to rise in the coming decade, bond prices are likely to fall and bond holders will actually be worse off (Economics 101!). However, with the shorter maturity, higher-yield corporate bonds become more attractive as they are less exposed to the beating by rising interest rates. Bearing in mind these ideas, it is understandable why these have been attractive to institutional investors in the past year.


I’ve inserted a little-known ETF, “HYG”, a high-yield corporate bond ETF that tracks the prices of high-yield corporate bonds. You can see that the bear trend sharply reversed at the turn of 2016 and has been rising steadily since. The uptrend is still in force, and some hedge fund managers are looking to speculate on a variety of interest-rate products.

What They’re Saying:

In summary, what we notice to be the consensus about the market in 2017 is this:

  • Heightened interest rate, inflation rate, and economic volatility
  • Renewed interest in unconventional investment strategies

That being said, it’s important to keep yourself updated and continually learning about financial markets. In such a unique market climate, it would serve you well to continue reading up and knowing what market participants are paying attention to.

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Research Sources:

bloomberg.com/news/articles/2017-02-28/the-top-hedge-funds-of-2016-share-their-best-bets-for-this-year