Are you SABOing your Investment for Retirement?

It was a very unfortunate event that investors lost their hard-earned money and retirement funds with Six Capital (Read the story here: Angry investors file police reports against FinTech firm Six Capital).

I am rather concerned with this statement in the Straits Times article on Six Capital: A few retirees indicated that they had poured in significant retirement sums. One lady was the age of my mother. She said that she was going to the temple to pray.

What can we learn – as retail investors – from this incident?

Let’s use the SABO model to analyse this incident. By the way, this SABO is NOT the Singlish word for “sabotage”.

 

SABO stands for Suitability, Affordability, Benefit and Objective.

Objective

Before we invest, we need to have a very clear objective in mind on why we need to invest, how long is our investment horizon, what is our risk profile, how much time we can allocate to monitor our investment portfolio, etc. Setting the right objective is very important because it serves as our foundation to identify, select and understand the right asset classes that meet our objective.

Suitability

Once we are clear with the objective, the next step is to select the asset classes which are suitable to our risk appetite, lifestyle, availability of time to do our homework, and investment horizon.

Here are examples of how one’s lifestyle, personality and risk appetite are wrongly matched with asset classes and investment strategy:

  • a busy executive scalps forex every night after work;
  • a retiree invests the majority of his / her retirement fund in land banking;
  • a person who dislikes numbers trades Option; and
  • a housewife who does not have computer knowledge trades cryptocurrency

Due to the mismatches, the above examples are all headed for disaster.

If you are struggling with your current investment, you should immediately do a review on your current investment portfolio or your trading strategy before you commit more time and more money doing something which may not be suitable for you.

The following are questions investors have to ask themselves to see whether the investment is suitable for them:

  • How will the investment strategy yield 18% per year?
  • What are the risks in this investment?
  • What is the worst-case scenario?
  • How volatile is this investment?
  • How quickly can the investors redeem their investment? Is there a lock-in period? Are there any early redemption charges and other charges?

Affordability

Next, the investor ought to ask:

  • Can we afford to lose our entire investment capital if we make a mistake investing in the wrong asset classes or instruments?
  • Can we afford to ride through the market volatility if there is a big correction or black swan event?
  • Can we afford to take more risk for higher return?
  • Can we afford to be ignorant, to DIY and listen to tips when it comes to investing?
  • Can we afford to get professional advice to help build a diversified portfolio that matches our needs and risk appetite?

investment planning for retirement - financial alliance

Benefits

Finally, the investors should have these questions:

  • Does the investment return meet our expectations?
  • Are our expectations realistic?
  • Is it worth it to take more risk for additional return?
  • Are our investments liquid and can we sell any time when we need the money?
  • Can the investment give us a peace of mind and offer us a “Sleep Well” factor?

My recommendation to retirees on their retirement fund planning:

The first priority is Capital Preservation, not Chase for Return, because you can’t afford to lose your retirement fund unless you can replenish your capital easily if you lose all of it.

Look for investments which are less volatile and pay consistent dividend, such as Bonds or REITs.

Nothing is guaranteed in this investment world. Please don’t believe in marketing materials that indicate “Guaranteed Return”, etc. Countries, banks, insurance companies can all go bankrupt, so, where does the guarantee come from?

Do have a diversified investment portfolio and manage the risk. Don’t put all your eggs into one basket. You cannot afford to make any costly mistake at retirement age. One big mistake may wipe out your entire retirement fund.

Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek unbiased financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

Published By:

Loh Kok Keong Kenny

Kenny Loh is a distinguished Wealth Advisory Director (RNF: LKK300389588) with a specialization in holistic investment planning and estate management. He excels in assisting clients to grow their investment capital and establish passive income streams for retirement. Kenny also facilitates tax-efficient portfolio transfers to beneficiaries, ensuring tax-efficient capital appreciation through risk mitigation approaches and optimized wealth transfer through strategic asset structuring.

In addition to his advisory role, Kenny is an esteemed SGX Academy trainer specializing in S-REIT investing and regularly shares his insights on MoneyFM 89.3. He holds the titles of Certified Estate & Legacy Planning Consultant and CERTIFIED FINANCIAL PLANNER (CFP).

With over a decade of experience in holistic estate planning, Kenny employs a unique “3-in-1 Will, LPA, and Standby Trust” solution to address clients’ social considerations, legal obligations, emotional needs, and family harmony. He holds double master’s degrees in Business Administration and Electrical Engineering, and is an Associate Estate Planning Practitioner (AEPP), a designation jointly awarded by The Society of Will Writers & Estate Planning Practitioners (SWWEPP) of the United Kingdom and Estate Planning Practitioner Limited (EPPL), the accreditation body for Asia.

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罗国强(Kenny Loh) 是一位杰出的财富咨询总监,专长于综合投资规划与遗产管理。他擅长协助客户实现投资资本增值,并建立退休被动收入来源。同时,他通过税务优化的方式帮助客户将投资组合高效转移给受益人,运用风险缓释策略确保资本增值的税务效率,并通过战略性资产配置实现财富传承的最优化。

除咨询工作外,罗国强是新加坡交易所学院(SGX Academy)的特聘讲师,专注于新加坡房地产投资信托(S-REIT)投资领域,并定期在MoneyFM 89.3电台分享专业见解。他拥有认证遗产与传承规划顾问(Certified Estate & Legacy Planning Consultant)及国际认证财务规划师(CFP)资格。

在逾十年的综合遗产规划经验中,他独创“遗嘱、持久授权书与备用信托三合一”解决方案,兼顾客户的社会责任、法律义务、情感需求及家庭和谐。他持有工商管理硕士与电气工程硕士双学位,并获英国遗嘱撰写及遗产规划从业者协会(SWWEPP)与亚洲认证机构遗产规划从业者有限公司(EPPL)联合授予副遗产规划从业师(AEPP)专业资格。

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