|Four Saving/Investing Principles
1. Find the right balance
Like how the world is constantly evolving, our priorities in life may change too. It is important to review your financial portfolio at different life stages or at a suggested interval of 3 to 5 years to ensure the right balance of savings and investment in your financial planning.
2. Saving with discipline
Cultivate the habit to save regularly to achieve your saving goals. There are various tools and solutions available in the market to help you with setting aside a portion of your income as savings every month.
3. Don’t invest emotionally and stay invested
Studies show that staying invested in equity, bond, or balance portfolio for a long period of time (i.e., Five years) tends to perform better compared to short term (i.e., One year). Trust that the market will rebound instead of exiting the market too prematurely.
4. Always diversify
Never keep all your eggs in the same basket. Have a balanced portfolio that diversifies your investments to manage risk and reduce volatility of an asset’s price movement.
Why do we need to invest our money?
1. To achieve our treasured life goals – basic goals and non-basic goals.
2. The most treasured basic goals include retirement and legacy planning:
· Retirement planning – to ensure we have sufficient savings to retire comfortably and be well prepared for extra expenses that we may potentially incur in our later years (example: elderly care)
· Legacy planning – it is not just about deciding how much and who will inherit your wealth, legacy planning is also about knowing how much money you will have to retire and to spend without any form of worries.
There are many wealth solutions or tools available depending on your risk appetite – ranging from low risk (i.e., time deposit) to high risk (i.e., equity) solution. It is important to diversify and to understand the purpose of each solution to achieve your financial objective.
Why insurance as one of the effective financial tools?
Insurance has evolved to be an effective financial tool that helps to enhance the overall return of a portfolio when it comes to long term wealth accumulation goals due to the following factors:
1. Disciplined saving approach
· It helps you to plan and achieve your long-term goals. There are different types of insurance in the market. Some insurance plan provides guaranteed returns at maturity that can be used to fund your retirement, medical expenses, legacy planning or any other life-long goal. The insurance mechanism helps you to lock in your savings to secure your goals where you will receive a guaranteed lump sum at maturity.
· Some insurance plans also provide certainty throughout your life cycle. It provides periodic payouts that has been predetermined regardless of market performance.
2. Long term stable returns with potential upside
· Insurance is a great saving tool that helps to curb inflation in long run and potentially earn higher return than fixed deposit due to the current low overnight policy rate (OPR) environment.
· Endowment insurance plan is among the common insurance plan that provides guaranteed lump sum and non-guaranteed bonuses to the policyholders.
3. Effective tool for asset distribution
· Death payout on life insurance claims can be as fast as 14 days depending on completeness of documents submitted. It serves as an effective asset distribution tool due to its fast distribution upon death of the policyholder.
· Insurance claim proceeds are creditor proof if it’s a trust policy and the money can be used by the beneficiaries for their living expenses.