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There’s a lot of confusing terminology and industry jargon bandied around the investment world, but the fundamentals of smart investing boil down to a small number of simple maxims that can also apply to other areas of life.
Begin with the end in mind
“Begin with the end in mind,” wrote author Stephen Covey in his book The 7 Habits of Highly Successful People. Life is a journey and to complete any journey successfully, you need a map; a map focuses your mind on the outcome and gives you the route required to get there. Without one, you are “flying blind” so set aside time to imagine where you want to be in the future (and don’t be afraid to dream big), then define step-by-step what you need to do to get there. Periodically reflect on your progress, pausing as you go to check if you’re on the right track and whether you need to make any adjustments.”
Magic of compounding
Albert Einstein once described compound interest as the “eighth wonder of the world” – interest on interest, and gains upon gains that take time to materialise but once certain values are reached they become significant. A piece of paper folded in half 10 times will result in a thickness roughly the width of your hand, but if it’s folded 20 times it will be 10km high, which makes it higher than Mount Everest. I’m not suggesting that money can be doubled every year, but compounding at just 5% can produce significant returns (especially if added to regularly with additional investment).
Manage your emotions
Human beings experience losses asymmetrically more severely than equivalent gains. An overwhelming fear of loss can cause investors to behave irrationally and make bad decisions, such as holding onto a stock for too long or selling too soon. It’s the reason why, after the Global Financial Crisis (GFC) that started in December 2007, retail investors didn’t return to investing until 2013, well after the GFC was over and markets had recovered to pre-crash levels. Efforts must be made to take the emotion out of investment decisions.
Don’t put your eggs in one basket
Diversification is one of the key factors to investing well. Invest in a range of assets that have the potential to grow in value and protect you against inflation. There are different ways to diversify and the more you can utilise the better. For example, you can diversify by the number of holdings, asset categories, sectors, geographies and currencies, and also use investment managers with different investment styles.
Steve Settle works in tandem with Tristan Perry, Head of Tax at Select Investors Australia, to support expatriates with financial wellbeing through integrated tax and wealth planning during their time in Singapore and beyond.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than you invested.
Please note that Select Investors, a Partner Practice of St. James’s Place (Singapore) Private Limited and Select Investors Australia Pty Ltd, do not work in legal partnership with each other and both are representatives of separate entities.
Contact Steve on steve.settle@sjpp.asia or +65 9776 0969 to arrange a consultation and discuss your planning needs for your financial future. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.
Members of the St. James’s Place Partnership in Singapore represent St. James’s Place (Singapore) Private Limited, which is part of the St. James’s Place Wealth Management Group,and it is regulated by the Monetary Authority of Singapore and is a member of the Investment Management Association of Singapore and Association of Financial Advisers (Singapore). Company Registration No. 200406398R. Capital Markets Services Licence No. CMS100851.
St. James’s Place Wealth Management Group Ltd Registered Office: St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP, United Kingdom. Registered in England Number 02627518.
