Growing your wealth has become an increasingly pressing challenge. The extremely low interest rates suggest that investors should take some risk in order to achieve higher returns and capital growth. But uncertainties lurk around every corner, ranging from emerging and more virulent Covid-19 strains to the prospect of a deeper recession.

The pandemic has fundamentally changed the way many people consume and invest, says Chung Shaw Bee, UOB director of deposit and wealth management in Singapore and the region.

“The rapid spread of Covid-19 over the past year has plunged the global economy into deep recession and households around the world have had to take a closer look at their finances and adapt to these unforeseen circumstances. These days, the idea of ​​risk is at the forefront of investor thinking. ”

In addition, the extent of the market collapse last March and the strong rebound that followed have forced many “to wonder whether they have adequately managed the risk of their investments,” she says.

The big question is: how do you plan your wealth so that almost all of your bases are covered? This means that your portfolio remains stable despite volatility. This illness or accident would not burn a hole in your finances. and this allows you to regularly provide funding for your children’s education and eventual retirement.

Grow your money

Wealth planning may sound intimidating, but it doesn’t have to be. However, it is important to note that there are no shortcuts, as is often said in finance, that there is no such thing as free lunch. Investing regularly harnesses the power of compounding so that even a modest amount that is regularly set aside grows into a substantial sum over time.

The good news is that Singaporeans intend to invest more, according to a study by UOB Asean Consumer Sentiment.

Overall, 38 percent of Singaporeans want to invest more, which is more pronounced among younger people. Gen X those between 40 and 55 years of age; Gen Y, 24 to 39 years old; and gene Z aged 18 to 23 years; 39, 42 and 36 percent respectively indicated their intention to invest more. The poll was published last October.

Here are a few steps to help you take stock of your financial condition.

Set yourself financial goals

By setting your goals for the short term (three to five years) and long term (10 years or more), you can set investment horizons that will have a significant impact on your investment. As stated in an article about MoneySense, goals must be intelligent – specific, measurable, achievable, realistic and time-bound.

Take stock of your assets and liabilities

Assets include amounts in bank accounts, investments, your Central Provident Fund (CPF) account, and your home. Liabilities include all loans including credit card debt, as well as home loans or car loans.

Your CPF account is an important part of your budget. It earns substantial risk-free rates between 2.5 percent for the ordinary account and up to 6 percent for the retirement account.

More and more Singaporeans are making voluntary top-ups in order to maximize interest rates. Based on CPF data, the number of retirement top-ups increased from $ 1.9 billion in 2018 to $ 2.9 billion in 2020.

Calculate your net cash flow

This includes adding up your monthly cash inflows and outflows. Inflows should include employment and investment income including dividends. The outflows usually include household expenses and insurance premiums.

You may find that you have significant sums of money in excess of what you need for a “rainy day” cash pillow. Since cash makes very little money and inflation is likely to rise, amounts in excess of this cushion can be invested in alternatives with higher returns.

Prioritize protection

Protection is the cornerstone of any financial plan because it takes into account the risks to life, health and your wealth. The Lebensschutz gives a death lump sum to surprise your relatives until they can enter the world of work.

The same goes for Critical Illness Plans that exceed family costs if a serious illness is diagnosed. Mortgage protection is also a must as it ensures that your home loan is covered in the event of death or permanent disability.

A hospital plan is essential. The MediShield Life and Integrated Shield Plans (IPs) are hospital and operation plans under the umbrella of the CPF. It helps here to consider your health care expectations and the affordability of premiums, especially for the elderly.

The rewards for MediShield Life and IPs will be deducted from your CPF account subject to an upper limit. The drivers have to be paid in cash. Take children under your cover, of course.

Invest regularly

There are certain general and prudent principles to ensure you can stay invested across market cycles.

First, you should be diversified enough that a downturn in a single sector or region doesn’t cause an entire portfolio to fuel. Second, invest regularly so you can average your exposure to the dollar cost. Regular investments allow you to buy more of an asset when prices are low and less when prices are high.

Third, be patient and stay invested. Given the unpredictability of markets, it is impossible to consistently plan entrances and exits. Data shows that staying invested over the long term is far more important.

Review your plan and asset allocation again

Your asset allocation is an overview of your investment plan. An article on the website of the Investment Management Association of Singapore said, “Asset allocation is probably the most important decision you need to make.

Research has shown that 90 percent of returns generally come from asset allocation. “Review your plan regularly, at least once a year, especially if your life circumstances change.

Risk-first as the basis

Asset planning and advice at UOB is based on a holistic risk-first approach. This proprietary approach sees a customer’s financial needs as a pyramid.

The basis consists of elements to protect your own assets; The middle is for asset building. These two layers form the core strategy. The top of the pyramid serves to increase prosperity and corresponds to the tactical part of your own allocation.

With this starting point, the advisory process tries to understand a client’s willingness and ability to take risks in order to ensure that they are only taking the appropriate risk and working sustainably towards their financial goals.

Ms. Chung Shaw Bee, UOB’s director of deposit and wealth management in Singapore and the region, says the bank has a two-pronged approach to helping clients: protect and build.

It’s important to determine the appropriate risk to take based on your purpose and horizon, she says. UOB’s investment portfolios include two types of solutions – core and megatrend. Core solutions are usually lower-risk and form the basis of a portfolio. Megatrend solutions allow customers to invest in companies that can generate profits from future structural trends.

In order to improve the services of its client advisors, the bank has introduced the UOB Portfolio Advisory Tools (PAT), a specially developed digital advisory platform that draws on market data from more than 12 years to simulate the expected performance of a portfolio against different market scenarios.

“This helps clients better understand the potential downside risk and compare the volatility and risk / return tradeoffs of the various investment options. These tools are designed to help our bankers provide comprehensive, relevant and actionable investment advice, ”she says.

UOB offers an omnichannel approach that gives customers flexibility in how they want to get in touch with the bank. This ranges from digital tools and insights to personal advice.

An example of how the risk-first approach works:

Ms. Lim, 35, is a working mother with two children, ages two and four. Her factual risk profile is ‘3’: she has a moderate risk appetite and is open to moderate volatility.

Based on the PAT, the counselor finds she has a shortage of $ 150,000 in critical illness coverage. Solutions are recommended to you to fill this gap.

Ms. Lim has $ 200,000 to invest. The recommended allocation is 80 percent for core strategies and 20 percent for tactical strategies. The 80 percent allocation is used for solutions with lower volatility such as global multi-asset funds and bonds in order to build their wealth on a sustainable basis.

The remaining 20 percent goes to tactical strategies such as stocks and structured notes so that she can participate in market opportunities and megatrends identified by the bank.

Genevieve Cua is the Business Times’ wealth editor.

Read the first article in our “Rethink Your Wealth” series here.

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