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Will you invest if the odds are 50% ?

Updated: Oct 6, 2021

In today’s short episode, we have James and Zong to talk more about the risk of investing… when the odds may or may not be in your favor.

There is no sure win investment. According to Straits Times, 269,000 people out of the 534,000 people who use their Central Provident Fund (CPF) money to invest end up in dire situation than before. The chances of them earning the 2.5% annual interest would be much higher if they just left it as it is.

According to James who leads a team of 30 financial advisors, investment is not the same as gambling, though both is a game of ‘luck’. “Investing is about understanding the market, doing research, and then putting the money. If you make a mistake, you probably haven’t done extensive research”. Investing is about taking calculated risk and knowing what you are investing into.

Some investment platforms do charge a small percentage for the services and fees, whereas CPF has removed the charges and fees incurred. This makes investment 100% strictly into the funds. When prompted further for guidance for investment newbies, the holistic wealth planning advisor encourage one to dive straight into the market, splitting the lump sum across the course of 2-4 times. Diversification is key. Investment is about compounding interest and long term is needed to see results – the magic of compounding interest.

Interest rate is typically inversely proportionate to investment. The higher the interest rate, the more reduced the investment is. When interest rates are high, the cost of borrowing increases, requiring investment to have a higher rate of return to be profitable.

However, investment is not gambling. For those who do not have any prior investment experience or knowledge, it is always more advisable to seek a professional advice (i.e financial advisor), who are better able to guide you along what are the pitfalls and which investment is most suitable.

With that said, how should one go about their investment journey?

Zong Jie advised one to map out how far away do they need to utilize the money, be it retirement or wedding or how you want to utilize the money. Also, understanding that CPF payout is either age 55 or 65, depending on your retirement sum.

Another advise is the way of investment – Lump sum vs Dollar-cost averaging, whereby the latter works best and minimize potential risks.

There is a common misconception among millennials today, deeming that CPF is unnecessary and would rather choose full cash income over CPF contribution. Just like how we should never put all our eggs into one basket, CPF acts as a safety net for one’s retirement.

Zong Jie touched briefly that it is possible to make 1Million dollar through CPF from article claims. Disclaimer, this does not mean that you start investing all your CPF money straight away. As CPF has an interest rate of 4%, higher than banks’ 0.05% - 0.7%, one needs to learn how to navigate and maximize the money to grow it.

Disclaimer: The information is meant purely for informational purposes and should not be relied upon as financial advice.

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