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Most of us will work and earn a salary for 40 years (about 25 years-old to 65 years-old), but we have to “share” this salary with our future selves – who will not be working for about 20 years in retirement (from 65 years-old to 85 years-old).
Essentially, every dollar that we spend today, we are taking away from our future selves. What we may not fully appreciate, at least without crunching the numbers, is how much our future selves may potentially rely on these savings.
One of the easiest ways to start building our retirement nest egg is a common personal finance advice we’ve probably already heard: “Pay yourself first”.
Rather than saving what is left of our salary at the end of each month, the idea is to put aside part of our income before we spend on anything else – including for our daily living needs. Even our grocery bills, internet plans, clothing expenses and transport budget can inflate with our lifestyle.
Ideally, we should set a standing instruction with our bank to transfer this money to a separate account each month – to pay our future selves first. This exercise can be important in rewiring the way we think about our salary.
How Much To Pay Yourself First?
When it comes to planning our personal finances, there’s rarely a one-size-fits-all number. If we don’t know where to begin, though, the 50-30-20 rule can be a good starting point. We should aim to spend a maximum of 50% of our salary on daily living expenses, 30% on discretionary expenses (i.e. our wants) and 20% towards savings.
This may not be suitable for everyone. Fresh graduates, singles or DINKS (referring to couples with dual income, and no kids) may be able to save much more than 20% of their monthly salaries. Individuals on the FIRE (financial independence, retire early) path may prefer to cut out luxuries and save as much as possible.
On the other hand, those who are part of the sandwiched generation, with young children and elderly parents, may find it challenging to siphon off 20% of their income into a separate account each month.
We need to find the right number that works for us – both today and in the future.
You Have To Invest For Your Future Self
Our savings only earn a nominal interest rate of 0.05% p.a in a bank savings account. Even high-interest savings accounts offer an attainable interest return of about 3.5% p.a. (Source: MAS as at 1 July 2024)
Meanwhile, inflation will be chipping away at our savings. Over the past two years, the core inflation rate in Singapore has risen to over 4.0%. (Source: Department of Statistics Singapore as at 1 July 2024) Anyone who left their savings sitting in a bank savings account would have seen their purchasing power shrink.
In other words, we would no longer be able to afford the same basket of goods that our money could have bought two years ago. Compounded over 40 years, the value of our savings will be greatly eroded.
Besides paying our future selves each month, we also need to invest for our future selves.
Gaining Global Exposure With A Single Investment
We can take advantage of investment management firms such as the homegrown Lion Global Investors to build our retirement nest egg. For example, we can refer to Lion Global Investors’ fund centre to shortlist investments that provide regular income and are designed to be part of a retirement portfolio.
For those who may not know where to start, we can zoom into the LionGlobal All Seasons Fund (Growth) or LionGlobal All Seasons Fund (Standard).
Both funds invest in a diversified mix of asset classes across the US, Asia Pacific and Europe. The difference is that the “Growth” fund targets an above average level of portfolio risk, while the “Standard” fund targets a below average level of portfolio risk.
We can see this in the funds’ exposure to equities VS fixed income. The Growth fund has close to 70% exposure to equities and 30% exposure to fixed income, while the Standard fund holds the opposite allocation.
Left: LionGlobal All Seasons Fund (Growth); Right: LionGlobal All Seasons Fund (Standard)
Source: Lion Global Investors as at 1 July 2024
Securities referenced are not intended as recommendations to buy or sell securities
Based on our risk appetite or risk profile (i.e. whether we are nearing our retirement age), we can invest in either funds and rest assured that we gain broad global exposure to equities and fixed income.
DIY Retirement Nest Egg With Core-Satellite Portfolio
Those who are more investment-savvy and want to beef up their nest egg can take a more self-directed approach – complementing a global core retirement portfolio, such as the LionGlobal All Seasons Fund above, with a satellite portfolio.
Via Lion Global Investors’ fund centre, we can shortlist the Infinity Global Stock Index Fund, giving us exposure to not just the largest stock market in the world with US stocks, but also companies in Japan, Europe and Canada.
*Source: Vanguard® Global Stock Index Fund as at 31 May 2024
Securities referenced are not intended as recommendations to buy or sell securities
For those who prefer more segmented exposure, we can choose to invest in just the US stock market, or even just Asia Pacific or Japan.
Lion Global Investors’ Infinity US 500 Stock Index Fund provides an investment that aims to track the performance of the S&P 500 Index. Besides giving us exposure to the 500 biggest stocks in the US market – many of which we will be familiar with (table on the right), we also enjoy diversification to various major sectors.
*Source: Vanguard® U.S. 500 Stock Index Fund as at 31 May 2024
Securities referenced are not intended as recommendations to buy or sell securities
Investors with conviction in the continued rise of Asia can consider investing in the LionGlobal Asia Pacific Fund. We gain broad exposure in the biggest companies (table on the right) listed across major Asia Pacific economies such as China, Australia, India, Taiwan, South Korea, Hong Kong, Malaysia, Singapore and others.
Source: Lion Global Investors as at 1 July 2024
Securities referenced are not intended as recommendations to buy or sell securities
Many Asia Pacific funds and/or ETFs may exclude Japan exposure. We can choose to invest in the biggest companies (table on the right) listed in the fourth largest economy in the world through the LionGlobal Japan Growth Fund SGD.
Source: Lion Global Investors as at 1 July 2024
Securities referenced are not intended as recommendations to buy or sell securities
We could also choose fixed income investments that deliver stable and visible distributions1 via Lion Global Investors.
For example, its LionGlobal Singapore Fixed Income Investment Fund Class A SGD enables investors to gain exposure to Singapore dollar-denominated debt securities issued by the Singapore Government, as well as the Financial and Real Estate sector.
Source: Lion Global Investors as at 1 July 2024
Securities referenced are not intended as recommendations to buy or sell securities
Alternatively, we may prefer broader fixed income exposure via the LionGlobal Short Duration Bond Fund Class A SGD (Dist) – which can give us broader exposure to various economies and sectors.
Source: Lion Global Investors as at 1 July 2024
Securities referenced are not intended as recommendations to buy or sell securities
Besides funds, we can also invest in ETFs. One ETF that can help us achieve both stable dividend distributions1 and potential capital appreciation is the Lion-OCBC Securities APAC Financial Dividend Plus ETF. It gives us diversified exposure to the 30 largest and most tradeable APAC financial institutions.2
Index Characteristics
We will also be quite familiar with the index top 10 holdings:
Read Also: 5 Things You Need To Know Before Investing In The Lion-Nomura Japan Active ETF (Powered by AI)
Boost Your Retirement Nest Egg In CPF
As employees in Singapore, we are contributing to our CPF monthly. Funds in our CPF Ordinary Account (OA) and Special Account (SA) will ultimately be channelled into our Retirement Account (RA) when we turn 55 – to provide us lifelong monthly payouts via CPF LIFE after we turn 65.
While our Special Account pays us a floor rate of 4.0%, and has climbed with the higher interest rate environment to 4.08% currently, our Ordinary Account continues to pay us floor rate of 2.5%. (Source: CPF as at 1 July 2024)
We can consider investing our OA funds to boost our retirement nest egg.
For a start, we can invest in Singapore Government T-bills, which has a cut-off yield of 3.74% (based on 20 June 2024 Auction).
For those of us who have a longer runway before retiring and the risk appetite, we may be able to compound our Ordinary Account savings into a much more meaningful sum for our retirement.
In the same token, we can consider some of Lion Global Investors’ investments listed above, enabling us to gain diverse global exposure to equities, as well as more concentrated investments in various regions, sectors and asset classes, via the CPF Investment Scheme (CPF-IS)
We can find out more about the individual investments on their respective fund page on Lion Global Investors’ website:
Suitable for self-directed approach
– Infinity Global Stock Index Fund SGD
– Infinity U.S 500 Stock Index Fund SGD
– LionGlobal Asia Pacific Fund SGD
– LionGlobal Japan Growth Fund SGD
– LionGlobal Singapore Fixed Income Investment Fund Class A SGD
– LionGlobal Short Duration Bond Fund Class A SGD (Dist)
– Lion-OCBC Securities APAC Financial Dividend Plus ETF
Suitable for those who need more handholding
– LionGlobal All Seasons Fund (Growth) SGD (Acc)
– LionGlobal All Seasons Fund (Standard) SGD (Acc)
We can invest in the funds discussed above via OCBC and FSMOne. As for the ETFs, we can invest in them via our broker – similar to how we would buy and sell stocks.
Footnote:
Distributions are not guaranteed. Distributions may be made up of income, capital gains, and/or capital.
The company’s business sector must be classified as “Banking, Insurance, Investment Services, or Specialty Finance & Services”, as defined by Factset’s Revere Business Industry Classification System (RBICS)
Disclaimer – Lion Global Investors Limited
This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. It is for information only, and is not a recommendation, offer or solicitation for the purchase or sale of any capital markets products or investments and does not have regard to your specific investment objectives, financial situation, tax position or needs.
You should read the prospectus and Product Highlights Sheet of the relevant fund/Lion-OCBC Securities APAC Financials Dividend Plus ETF (“ETF”) which are available and may be obtained from Lion Global Investors Limited (“LGI”) or any of its distributors and appointed Participating Dealers (“PDs”), for further details including the risk factors and consider if a fund/ETF is suitable for you and seek such advice from a financial adviser if necessary, before deciding whether to invest in the fund or purchase units in the ETF. Applications for units in our funds must be made on forms accompanying the prospectus.
Investments in our funds/ETFs are not obligations of, deposits in, guaranteed or insured by LGI or any of its affiliates and are subject to investment risks including the possible loss of the principal amount invested. The performance of a fund/ETF is not guaranteed and the value of units in a fund/ETF and the income accruing to the units, if any, may rise or fall. Past performance, payout yields and payments as well as any predictions, projections, or forecasts are not necessarily indicative of the future or likely performance, payout yields and payments of a fund/ETF. Any extraordinary performance may be due to exceptional circumstances which may not be sustainable. Dividend distributions, which may be either out of income and/or capital, are not guaranteed and subject to LGI’s discretion. Any such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value of the fund/ETF. Any references to specific securities are for illustration purposes and are not to be considered as recommendations to buy or sell the securities. It should not be assumed that investment in such specific securities will be profitable. There can be no assurance that any of the allocations or holdings presented will remain in the fund/ETF at the time this information is presented. Any information (which includes opinions, estimates, graphs, charts, formulae or devices) is subject to change or correction at any time without notice and is not to be relied on as advice. You are advised to conduct your own independent assessment and investigation of the relevance, accuracy, adequacy and reliability of any information or contained herein and seek professional advice on them. No warranty is given and no liability is accepted for any loss arising directly or indirectly as a result of you acting on such information. The fund/ETF may, where permitted by the prospectus, invest in financial derivative instruments for hedging purposes or for the purpose of efficient portfolio management. LGI, its related companies, their directors and/or employees may hold units of a fund/ETF and be engaged in purchasing or selling units of a fund/ETF for themselves or their clients.
This publication is issued in Singapore ©Lion Global Investors® Limited (UEN/ Registration No. 198601745D). All rights reserved. LGI is a Singapore incorporated company, and is not related to any corporation or trading entity that is domiciled in Europe or the United States (other than entities owned by its holding companies).
Disclaimer – LionGlobal Asia Pacific Fund / LionGlobal Japan Growth Fund
The Fund’s Net Asset Value may have higher volatility as a result of its narrower investment focus on a limited geographical market, when compared to funds investing in global or wider regional markets.
Disclaimer – Infinity U.S. 500 Stock Index Fund
The Vanguard Umbrella Sub-Fund (and correspondingly, the Sub-Fund) which invests in a particular geographical region and which concentrate its holdings in a single region typically have higher share-price volatility than broadly diversified international stock funds.
Disclaimer – Lion-OCBC Securities APAC Financial Dividend Plus ETF
The ETF’s net asset value may have higher volatility as a result of its narrower investment focus on a limited geographical market, when compared to funds investing in global markets.
The units of the ETF are listed and traded on the Singapore Exchange Securities Trading Limited (“SGX-ST”), and may be traded at prices different from its net asset value, suspended from trading, or delisted. Such listing does not guarantee a liquid market for the units. You cannot purchase or redeem units in the ETF directly with the manager of the ETF, but you may, subject to specific conditions, do so on the SGX-ST or through the PDs.
Disclaimer – OCBC Securities Private Limited
The distributions will be a minimum of 5% per annum of the issue price per unit during the ETF’s initial offer period for the first 2 years. Thereafter, there will be a targeted dividend yield of around 5% per annum of the Net Asset Value per unit, less expenses. Distributions may be paid from distributable income, capital gains and/or capital. These distributions are not guaranteed and are subject to the fund’s distribution policy. For full details, refer to the fund prospectus. Past performance, yields, and payments are not necessarily indicative of future or likely performance, yields, or payments.
The information provided herein is a compilation or summary of materials and data based from external sources available to OCBC Securities Private Limited (“OSPL”), and does not represent OSPL’s view on the matters mentioned. The information herein are not meant as recommendation or advice in any manner from OSPL.. Where any graph, chart, formula or device are included, there maybe limitations, and difficulties in respect of the use, of such graph, chart, formula or device (as the case may be). Whilst we have taken all reasonable care to ensure that the information contained in this advertisement or publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. Trading in capital market products and borrowing to finance the trading transactions (including, but not limited to leveraged trading or gearing) can be very risky, and you may lose all or more than the amount invested or deposited. Where necessary, please seek advice from an independent financial adviser regarding the suitability of any trade or investment product taking into account your investment objectives, financial situation or particular needs before making a commitment to trade or purchase the investment product. If you choose not to seek independent financial advice, please consider whether the trade or product in question is suitable for you. You should consider carefully and exercise caution in making any trading decision whether or not you have received advice from any financial adviser. You should also read the relevant prospectus and/or profile statement (a copy of which may be obtained from the relevant fund manager or any of its approved distributors), prior to any trading or investment decision. In relation to collective investment schemes, the value of the units and the income accruing therefrom, if any, may rise or fall. Past performance, yields and payments, as well as, any prediction, projection, or forecast are not necessarily indicative of the future or likely performance, yields and payments of the ETF. For funds that are listed on an approved exchange, investors are not allowed to redeem their units in those funds with the manager, except under certain specified conditions. The listing of the units of those funds on any approved exchange does not guarantee a liquid market for the units. No representation or warranty whatsoever (including without limitation any representation or warranty as to accuracy, usefulness, adequacy, timeliness or completeness) in respect of any information (including without limitation any statement, figures, opinion, view or estimate) provided herein is given by OSPL and it should not be relied upon as such. OSPL does not undertake an obligation to update the information or to correct any inaccuracy that may become apparent at a later time. OSPL shall not be responsible for any loss or damage howsoever arising, directly or indirectly, as a result of any person acting on any information provided herein. The information provided herein is intended for general circulation/discussion purposes only and may not be published or circulated in whole or in part without our written consent. All trademarks, registered trademarks, product names and company names or logos mentioned herein are the property of their respective owners, and you agree that you will not do anything to infringe or prejudice those rights. Reference to any products, services, processes or other information, does not constitute or imply endorsement, sponsorship or recommendation thereof by OSPL. Past performance, yields, and payments are not necessarily indicative of future or likely performance, yields, or payments. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
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Disclaimer – Singapore Exchange Limited
The units of the Lion-OCBC Securities APAC Financials Dividend Plus ETF are not in any way sponsored, endorsed, sold or promoted by the Singapore Exchange Limited (“SGX”) and/or its affiliates and SGX and/or its affiliates make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the iEdge APAC Financials Dividend Plus Index and/or the figure at which the iEdge APAC Financials Dividend Plus Index stands at any particular time on any particular day or otherwise. The iEdge APAC Financials Dividend Plus Index is administrated, calculated and published by SGX. SGX shall not be liable (whether in negligence or otherwise) to any person for any error in the Lion-OCBC Securities APAC Financials Dividend Plus ETF and the iEdge APAC Financials Dividend Plus Index and shall not be under any obligation to advise any person of any error therein.
Intellectual property rights in the iEdge APAC Financials Dividend Plus Index vest in SGX. The iEdge APAC Financials Dividend Plus Index is used by Lion Global Investors Limited under licence.
The post Paying Your (Future) Self First: How The Investments You Make Today Can Support Your Retirement In The Future appeared first on DollarsAndSense.sg.
