I had a very enjoyable talk with a client recently.
She wanted to pursue FIRE [Financial Independence Retire Early - the art of having passive income that outweighs your expenses and resulting in financial freedom] aggressively, and I was more than happy to help her with the endeavor.
Unfortunately, after breaking down the math, she described the potential experience moving forward as 'suffocating'.
"Breaking Down The Math" is a technique that I use in consultancy where you simply calculate with math how one would achieve a financial goal.
It has nothing to do with whose service you use, or doing it yourself - the math is very simple and infallible.
If you need $1million to retire in 20 years and you have no capital at the moment, you have to invest over $1700/mth at an 8% net of fee rate - probably a bit more, since this was based off a yearly calculation. Fullstop.
Again, it has nothing to do with whose service you use. Obviously I typically take the opportunity to provide the means to execute this, but not everyone ends up choosing my service.
Hopefully they can get it done themselves, but I really have doubts because most people who don't even realize their problem rarely have the capacity to come up and execute the solution across decades.
As grown ups, whether or not you achieve FIRE requires discipline and commitment not unlike buying a house and servicing a mortgage.
Perhaps it was because I was amused with how she used the word 'suffocating', but I felt the need to give her a little assurance that the pursuit of FIRE, while a little 'suffocating' as aptly described - was a worthwhile pursuit that I'm doing myself.
A Peek at My Portfolio:
1) Long Term Investments with Manulife:
I was working as a Director of Sales (Financial Services) at MFA for a really long time, and I'd grown really fond of Manulife as a company. They've created some really incredible products and obviously getting a discount on investing didn't hurt one bit.
You'll notice that I have 3 policies, all of which require a lock-in period of anywhere between 10 and 20 years.
The following account value is one out of three policies that I have.
The total gross cash value of the 3 does extend significantly more than this one policy (and I'd personally prefer not to disclose exactly how much more) but I wanted to highlight your attention to two things:
a) Gross Cash Value: The policy is not very old, but the high investment returns from a top up along with my regular yearly premium has resulted in a significant gross cash value.
b) Surrender Charge: The 'suffocating' part, which really is intense - 79% losses incurred immediately if I tried to surrender it. While my investment returns have been significant, I wouldn't be able to take that kind of loss at all.
Over the years working in consultancy, I diverted more and more money towards my long term - starting from $6000/yr to well over $72,000/yr in fixed, lock in plans.
Unfortunately for yours truly, my FIRE requires a lot more than $50,000 invested regularly a year. Which brings us to...
2) Private Equity and Bond Deals:
Maybe its because as an investment specialist you meet a lot of unique people and investments - but after a while, standard investments like bonds and equities don't excite you as much as they used to.
I invested in private companies as early as 2016 (admittedly just lucking into good investments in 2017) and I've kept doing so periodically ever since, setting aside a small budget for it every year outside of my business expenses and regular investments.
You could say that my barbell strategy, as I talked about on MoneyFM last year, is actually much more aggressive.
Some of you know that I've bought Land in Thailand. Less of you know (although now more) that I can't purchase land in Thailand.
At least, not under my name.
The land is not expensive, which is a little out of respect for my professionalism (my clients' sanity) and a lot more out of respect for my parents (who I think would freak out if I had bought a land size 4 or 5 times that much).
I did build on it though, so thankfully that investment paid out and my 5 figure investment is now worth 6 figures.
...at least, if I eventually marry the Thai citizen I should be marrying.
1) Ethereum: I made a neat 5 figure amount from buying and selling crypto recently [unfortunately or fortunately, yours truly isn’t a big fan of having so much of his portfolio concentrated into digital commodities]. It was higher than $20k but lower than $50k.
Incidentally, I have completely sold off my crypto position although I am looking at getting back in after consolidating some of my finances.
2) High Yield Bonds: One of my first investments. They technically made money, but I quickly ditched them after learning about stocks.
3) Some Stocks and REITs (DBS Vickers): Fun for a while, but troublesome to track and far more volatile than funds.
4) Stashaway: Didn't last long, but I thought Freddy was a genius.
5) SeedIn (now known as BRDGE): Eventually found my own P2P deals.
6) Real Estate: Probably the only loss I made out of the previous investments. The person wanted me to co-share a property and put himself down as the personal guarantor. The property went bankrupt during Covid and he provided proof of bankruptcy (after I had some...words, with him).
I really felt no need to make the person's life worse. Thankfully it wasn't too sizeable.
7) Extras: Technically still part of my portfolio, like Cash, Insurance, CPF, a Pru Flexi Cash...
Why I Was Reluctant To Share (and why I decided to start)
I think people have been asking me for a very, very long time (almost 3 years now) to show my portfolio, and even now I wasn't really able to do that fully.
I'm really going to just test out the reaction here (and even have this eventually shared on Seedly), where most people have a love-hate relationship with me (except for the Seedly founders, who just straight up hate me)
I have some fears of course.
Some people might become hyper aware of my finances. Like they might treat me differently now that they know I have some money. I've always behaved like I don't have any - so it might be jarring, even to clients who I love.
Some people might make really negative comments about Financial Advisors [because you have to be poor to be a good consultant and you need to have a car to be a bad one, at least on many Finance Forums].
But ultimately, these articles are really for my clients and dedicated readers who know that I'm the kind of person who practices what he preaches, however imperfectly.
Some of the reasons my portfolio is the way it is now is because:
a) Shift Towards Concentration: Ultimately I wanted some of my money in a few aggressive areas since most of it is locked up.
For example, one of my private bond deals pays me about $10,000/yr for 10 years from a $50,000 capital. I didn't want to spend so much time and energy managing investments that were out of that range, or too small in volume.
b) Leading by Example: I think I've wanted for a long time to help my clients and readers understand - with some evidence, even censored - that I don't just take my commissions made from you and call it a day. I invest more, and for longer periods, and more aggressively than most of my clients.
There isn't a portfolio that I sell that I haven't tested out with my own money (sadly).
And I really wanted that to be assuring to all of you that we face the same challenges together - and that its worth it.
c) Accountability: From this point, I think it's easier for people to understand exactly how much I have, how much I make, how much I invest - people can make reasonably intelligent guesses by this point if they really took the time out. [I hope they won't]
Moving forward, much like Chris from Tree of Prosperity - whose transparency I admire tremendously, some of my investment failures will be more obvious.
It's a professional and personal risk, but it's one I'm willing to take.
Are you Serious About FIRE? I Can't Take Most FIRE Pundits Seriously.
Coming back to my client, I was really grateful for her because she recognized that FIRE isn't an easy thing to do.
Many people talk a good FIRE game - but they can't commit. They always want an out, or to make an excuse about why they can't make their FIRE happen on time.
Proper Financial Planning and fighting for your retirement is what will get you there - not compromising your goals.
It’s really odd and sad to see a lot of FIRE pundits screaming about fire sales locally, before buying and selling quite willy-nilly. This is consistent with Dalbar studies denoting that most people don’t hold an investment for longer than 3.27 years
There’s no commitment to a plan, which is why you rarely ever see people come forward with their portfolios. Even the ones who do, like Miss FitFI last year, get heavily criticized by jealous weebs.
I’m not talking about a lock-in period, or that you must buy something from a Financial Consultant or an insurance company. But my own plan is very simple:
Current Age: 29
Age I’d like to FIRE at: 38
Net Worth Required for FIRE: $2.2 million dollars
Savings Required with Investment Factor: About $140,000/yr
Some people may comment on my income or savings, but I've worked really hard because
1) There's a very decent chance that I'll be the sole breadwinner for the rest of my life.
2) I'm self employed.
My income is variable, my business could fail and I don't have CPF.
I intend to meet every one of my obligations to my investment plans by hook or by crook.
3) I want to reach a stage in my life where I can have my advice taken more seriously by the public, since I'd be financially free.
What About You?
...I've never bought a car, or a condo.
I've never ridden that ridiculously expensive Singapore Flyer.
I've never stayed in a 5 star hotel in Singapore.
I've never tailored an outfit with my own money before.
I'd like to experience that at some point, but not now, and not likely for the next decade - because the journey to FIRE is a little suffocating.
But it's what I want.
And I hope it's what you truly want too, because it seems pointless hanging around an environment where everyone is talking about FIRE but not really doing it, or achieving it.
I hope a bit of honesty and transparency on my end can at least show readers that it's not easy to commit to an investment plan that requires years of commitment - but that you and I are walking this journey together.
If you'd like, I'd love to sit down with you and help you work out how to achieve your dreams financially - knowing full well that I'm right with you, step by step.
Money Maverick is the alias of one Luke Ho, a licensed Financial Consultant since 2017. He is an Investment and Critical Illness Insurance Specialist.
Using expensive, high fee unit Trusts, he has outperformed the SNP500 every year from 2016. For the year 2020, Client performance was between 20% to 141% net of fees using strictly MAS-licensed investment instruments.
Money Maverick was started in 2018 to address the many Financial Misconceptions put out by non-licensed Financial Bloggers giving ‘free’ and potentially detrimental advice.
He would be happy to give you professional advice personally, or to speak to you as a writer of one of the Top 20 Investment Blogs in Singapore.
[Top 20 Financial Blogs, Singapore: Withcontent.co [2019, 2020]
CONTACT: 91769099 [whatsapp, telegram]
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The views on his blog are strictly of his own opinion and have no affiliation to any of the companies he works with.