27 Oct 2018

Not so ‘crazy’ advice to becoming a ‘Rich Asian’

In the book/movie “Crazy Rich Asians”, the protagonist Nicholas Young came from old money. Indeed, most of the characters in the movie were also from old money.

Never mind the movie, real life rich Asians are not all “living off grandfather’s money”, as the book version suggests. Yes, many inherited their wealth like Nicholas and other characters in the book such as Carmen Kwek (“grand daughter of Robert ‘Sugar King’ Kwek”), “Instant Noodles heiress” Justina Wei and Robert Liang “of the Liang Finance Group Liangs”. But in real life, just as many worked hard, saved and built businesses.

But there are values and practices which do help real-life “crazy rich” Asians stay “crazy rich”; values and practices that had helped real-life, first-generation uber-rich Asians build their fortunes.

WHO CARES IF OTHERS CALL YOU A SCROOGE

“Crazy Rich Asians” opens with Nicholas and his cousin Astrid struggling through a train ride and trudging through rain-soaked streets from Heathrow Airport because as Astrid’s mother said, “it was a sin to take a taxi nine blocks.”

Good attitude. It’s not just about the pennies, it’s about having a respect for money. So, look at your life and identify the money leakages. The multiple online subscriptions, the costly movie channels you rarely watch, the food that sit in your fridge until it expires... we can go on but you are the best judge of the waste that goes on in your own life.

Go on, let people call you Scrooge. You’ll have the last laugh.

PEOPLE DON’T GET SERIOUSLY RICH SITTING ON SAVINGS – START TO INVEST

Once you’ve saved some capital, use it. Don’t just sit on it. Most inspirational success stories start with hard work and savings. But I don’t know any that continued and ended with savings. Some measure of risk-taking and investment is usually the cornerstone of success stories.

AND INVEST IN STOCKS

Over the long-term, stocks are usually the best performing asset class – by a huge margin. Because stock prices can move up or down, depending on the performance of the company and market sentiment, they’re thought of as risky. But the long-term history of quality stocks is about mean reversion on rising trend lines. That is, stock markets go through cycles – up and down. And there will be some losers. But in sound economies, stock prices generally go up and down against a rising trend line. And the longer you hold the stocks, the less likely you are to lose money on them.

And you can start now, even with a small amount of capital, through a Regular Savings Plan that puts money regularly into equity and bond funds. From just SGD100 a month, you can now invest affordably in either Singapore Bonds or Blue Chip Stocks, via two Exchange Traded Funds (“ETFs”) listed on the Singapore Exchange.

DIVERSIFY – DON’T PUT ALL YOUR EGGS IN ONE BASKET

Although stocks are the highest returning asset class in the long-term, it is prudent to have a diversified portfolio – not just to spread your risks, but also to get better returns with lower volatility.

Academic research found that multi-asset class portfolios tend to perform better than single asset class portfolios, with lower levels of volatility too. So include bonds (such as the Singapore Savings Bond), real estate investment trusts (REITS) and where your risk profile allows, alternative asset classes such as commodities and hedge funds/fund of hedge funds in your portfolio.

INVEST IN YOURSELF, THEN INVEST IN THINGS YOU UNDERSTAND REALLY WELL

Warren Buffett says there is one investment that supersedes all others: Invest in yourself. “Address whatever you feel your weaknesses are, and do it now,” he said. And if you invest enough in your own capabilities and knowledge, there will come a time you have so much knowledge in a particular field, you can start your own business.

DON’T JUST THINK ABOUT BEING RICH, START ACTING ON IT NOW!

Time is money. Many of us put off uncomfortable but necessary tasks, such as understanding how much you’ve spent. But why would you spend more time planning your next holiday itinerary, but not on making your money work harder?

If you are a DBS/POSB customer, make use of the Your Financial GPS, a free digital financial advisor that is already embedded into your banking transactional activities. It helps you discover and visualise where you are financially vis-à-vis the goals you’ve set, and offers advice on how to manage your savings, protection coverage, and investments.

Finally, here’s a line made popular by another Asian - a crazy-famous one - the late Bruce Lee: “Knowing is not enough, we must apply. Willing is not enough, we must do.”

Good luck on becoming a savvy, rich Asian!

It’s not ‘crazy’ to start planning your finances today.

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