When it comes to being financially prudent, it is vital to have a holistic approach and implement a strategy for the long-term. Starting your investing journey early, being disciplined over a span of several decades and taking an appropriate level of risk are important steps to growing your wealth and staying ahead of inflation.
However, while wealth creation is important, it is just a part of a good investment plan. The other challenge many investors may also struggle with is wealth protection. In fact, according to the AIA Singapore's Affluence Barometer 2019, 63% of the affluent in Singapore are not confident about their ability to create wealth, with many citing uncertainties caused by global market volatility and geopolitical climate.
As an investor, you need to ensure that both these areas are adequately covered when you build your retirement portfolio. While you would want to grow your wealth over time, you also need to effectively manage your investment risks to ensure that your portfolio returns do not get cancelled out by external factors such as ever-changing market conditions or unforeseen personal circumstances, such as accidents, illnesses or even a death in the family, which could affect your investment portfolio.
Are you saving too much or too little?
In order to be a successful investor, you first need to have the financial discipline to be a fervent saver. It's only when you have surpluses (i.e. you earn more than you spend) in your savings account that you would be able embark on investing to earn higher returns for the future.
However, one question you may have is determining how much you should be investing.
On one hand, you do not want to be too conservative with your savings, since there is an opportunity cost to holding cash. At the same time, you do not want to invest your entire savings at once, as that would leave you without emergency savings to tide through unexpected situations in life.
You may also wish to invest more of your savings but are unsure how to invest or lack the confidence to deploy a large sum of money in the markets on your own. This is especially relevant if you are just starting out in your investment journey or do not have the time to research and track your investment growth.
Another factor that needs to be considered is your appetite for risk. If you invest too much, you may be taking on a higher level of risk in your investment portfolio than you may be comfortable with. If you invest too little, you run the risk of having your spending power be eroded by inflation over time.
Do you have an adequate wealth protection strategy?
Wealth can be earned as well as lost. This is why it's important to protect your investment portfolio even while trying to grow it. There are two risks that you face when you make an investment.
The first is the investment risk that you will be exposed to. You could invest in the wrong company, sector or even asset class. You could even invest in the right assets but at the wrong time. The value of your investment goes down or fails to achieve the desired growth that you want and you fail to achieve your investment objectives.
During the current plunge in asset prices on the back of the global spread of COVID-19, there may be a question of whether it is the wrong time or even the right time to invest. While no one can predict when is the best time to invest, you need to ensure you can hold your investments during such crises, to gain from any subsequent market recovery.
If you are convinced of certain investments for the long-term, the present market downturn could present great opportunities to pick up assets at vastly discounted prices.
The other risk when it comes to investing would be external factors having an adverse impact on your life. Accidents, medical conditions and death can derail even the best investment plans. For example, you may have put in place a long-term plan to build a retirement nest egg by making regular investments over the next two to three decades. An unforeseeable medical emergency which results in you not being able to work for a few years can throw your plans off-course, even having adverse consequences for your and your family's standard of living. This is why insurance also forms an important part of your wealth creation plan.
AIA Platinum Wealth Elite: One solution for both your wealth creation and wealth protection needs
A newly launched product designed to address the specific needs of Singapore's affluent, AIA Platinum Wealth Elite combines the best of wealth management and wealth protection to help Singaporeans with their financial objectives, and also to future-proof their lifestyle.
By allowing AIA customers access to leading institutional investment managers, including Baillie Gifford, BlackRock and Wellington Management, that have established track records and global capabilities, our customers have the confidence of knowing their investment monies are in good hands.
With AIA Platinum Wealth Elite, you can choose from three distinct portfolios – Elite Conservative, Elite Balanced, Elite Adventurous – based on your individual risk appetite. These investments would be made under the stewardship of AIA to ensure your investment portfolio is globally diversified and primed to deliver long-term sustainable returns to help you reach your wealth goals.
By investing in the policy over a duration of between five to 20 years, or through a single premium, you have the flexibility to opt for a Dollar Cost Averaging or a lump sum investing strategy.
To protect you against the unforeseen, AIA Platinum Wealth Elite also provides a death benefit payout and critical illness benefit to ensure there's a nest egg to provide for your family even if you are unable to contribute to growing it.
If you are unsure about your wealth creation or wealth protection needs, contact an AIA Financial Services Consultant who can explain options to you.