@sk Sean Toh - What Are The Different Investment Vehicles For 8% Return With An Investment Time Horizon Of 15 Years?

Question For Sean Toh? - What Are The Different Investment Vehicles For 8% Return With An Investment Time Horizon Of 15 Years?

Hi Sean,

I recently made some money from an enbloc sale and would like to see this money work extremely hard for me at about 8%pa in order to support my semi-retirement at age 45 next year. Please share with me what investment vehicles I should use? Many thanks.

From
Albert

Here Is The Answers Specially For Your Questions, Albert! Sincerely From Sean Toh.

Dear Albert,

First of all, let me take this opportunity to congratulate you on your win in the property market. My first advice that I will give you is to learn to preserve at least half of the capital first because you might have to wait for the next Enbloc sale to reap a chuck of profit if you invest in the next property or this kind of opportunity may never ever happen again.

From the question you asked and the facts you have given me, you have another 15 years to generate returns and I do not want to take the time after 60 years old as your investment horizon time because you simply have no time for the investment instruments to risk your nest egg.

Fact 1 : Time For Investment – 15 years.

Fact 2 : Investment return – 8%.

The next few questions that I would like to address are :

1. What is your investment risk appetite?

2. How knowledgeable are you in your financial education to understand and use the different types of investment instruments to generate returns?

If you have a high investment risk profile, having more stocks in your investment portfolio will generate more returns but you have to know how to pick the right stocks to reap good returns. Returns from stocks can be varying or no return at all, you could even lose money too! You could even lose sleep over your investment if you do not have a high investment risk profile.Normally, financial planners will access your risk profile before they advise you on any suitable investment. As an example of the portfolio of an aggressive investor, you can see that he is willing to invest in stocks that might have growth potentials. This is just for illustration purpose only!

For a moderately aggressive investor, his investment portfolio might be something like that. For illustration purpose only! You will realize that the financial planner will structure some bonds in his investment portfolio so that the risks are reduced with the introduction of the new investment instruments called the “Bonds”.

For conservative investor, his portfolio might look something like this. For illustration purpose only! His investment portfolio will consist more Fixed Income. Example of Fixed Income is your Fixed Deposit or Cash Fund Units Trust.

To generate a return of 8% , you need to have a strategy to meet your investment objective. There are many ways to meet 8% returns. An aggressive investor might use volatile stocks to generate 200% in one trade and lose 30-50 % in multiple trades and the overall end resultant returns is 8-9%. For 15 years, he will do just that to achieve 8% annual return. In this case, the investor is actively trading in the market. Other investors might use a slightly different strategy to generate 6% annually consistently using more conservative portfolio with less stocks in the portfolio and fall short of the objective by 2% after 15 years. That is still not so bad as he is more laid back with trading and investing but just letting the investment portfolio works for him. Others might be so good in trading that they use Forex Trading or Options Trading to get their returns and they achieve their investment objectives much sooner with higher returns. My advice is to understand the mechanism of the investment instruments first before you invest it all yourself.

If you don’t like the idea of investing yourself, I will advise you to get a qualified financial advisor to plan for you. Ask him or her to propose a structure investment portfolio for you for a 8% returns for a investment time horizon of 15 years. If you are quite happy with it, you can then stick with the plan. There is definitely no fixed plan or guaranteed plan!

My point of view is with the stock market reaching a ‘high’ now at a STI Index of 3400-3500. Unless, the fundamentals and economical indicators can support good investment sentiments, the potential for growth might be limited. As for bonds like Singapore Bond Fund, you can only get returns of 3-4%. For fixed income instruments, return is minimum at 1.5-2%. Sophisticated stock investors can make huge amount of returns by shorting the market or using ‘put’ warrant to leverage on their investment. Opportunities are plenty-full but that depends on how you look at it and also your ability to reap return based on your financial literacy, quotient and risk profile to take risks and an excellent entry and exit investment plan while investing.

You will realize that I do not take clients or advise you to which is the most suitable instruments to use. Even if I recommend a particular investment instrument, that investor could not reap returns based on their investment psychological make-up. My advice is to understand your investment instruments well so that you can then invest. It’s ok to put the money in the bank and do nothing with it until you equip yourself with sufficient financial education and you have tested your investment trading system to reap return, then you can invest with confident. At least, you have your money for retirement, as you are still semi-retire with a job providing income for your living expenses. For the months when you are not making that much money, you just have to cut back on some of your expenses. Maybe, you just have to take a slightly longer time to achieve the desired sum of money that you wish to accumulate.

Here is a list of investment instruments and possible returns

Stocks – Varying return, return can be huge.

Bonds – 3-4%Fixed Income – 1.5-2%

Units Trust – Varying, return can reach 15-20% if you know how to time your investment with strategies.

Gold – Need to understand the operating mechanism as I personally is not well-versed in it.

Reit – Unit Trust in Real Estate or properties (can be residential, commercial or shopping center buildings). Return possible 5-6% with dividends re-invested back for more investment.

Stock Warrants – Varying return, return cab be huge or lose every single cents of capital if warrants expire.

Entrepreneurship or start a business – Varying return but take lots of passion to create a successful business. Risk is very high if you have no business sense.

Albert, I could only give you a guide to the big picture. I hope I have provided you with a clearer picture before you decide on your next move. Always remember, you are in control and responsible for your investment decisions even if you ask a good financial planner to help you achieve your investment objectives. Never put all your eggs in one basket, only master investors like Warren Buffetts or George Soros know what they are doing. Assets allocation is the strategy to manage your investment risks. Search the internet or read up books on ‘Assets Allocation’ and ‘Modern Portfolio Theory’. Last but not least, wish you all the success in your investment endeavors. Before I end, Albert.

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Although I have recommended and advise you on lots of matters, it takes more than education, resources and advice for you to be successful. You need to be patience and committed to your plan to achieve a bit of success. It’s that bit of success that will motivate you even more to learn and apply what you learned in life for your future success. Just in case, if you have been waiting the whole day for all the answers. I will like to apologize for the delay to your answers because I believe in giving my best advice to you personally and sincerely from my heart. I needed the time to understand the problems you faced, understanding them and finding the right resources for your education so that you have a higher success rate when you implement your plan.
Last but not least, may I wish you all the success implementing the plan and achieving some results that you can see for yourself. Do consult a proper financial planner or advisor if you are really in doubts. It's you that make the decision to decide if you want to be successful? Enjoy creating wealth with health. It’s has been my pleasure providing consultancy service to you, Albert!

Your Sincerely
Sean Toh

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