Last week, we introduced the Personal Wealth Equation to you.
And if you still remember, on the investment side of the equation, there is really no need to constantly guess where the markets are going and try to time it. All you need to do is to stay invested in the right portfolio for the long term- it’s that simple.
But here’s where the not easy part comes in- many things get in the way of investing: investor psychology, market noise, costs and sometimes just silly thinking.
Watch this short video as Christopher Tan, CEO of Providend, shares a personal conversation he had with the CEO of a large Fund Management company on investing to understand more.
Hello everybody. Today, I’m going to continue from the last episode to talk about how we can be successful financially and still enjoy our life.
You see, sometime back, I had lunch with the CEO of a large Fund Management Company. And during lunch, this gentleman said that after a few decades of being a professional investor managing money for his clients, he has come to realise that there is no need to try and find the best time to get in and out of the market. When all you need to do is to stay invested for the long term and get the market returns.
And I thought, “Wow! That’s so encouraging!” Because this is exactly what we at Providend, believe in. And as I reflect upon his sharing, it brings to mind the Personal Wealth Equation that I’ve shared with all of you in a previous episode.
So, let’s take a look at the Personal Wealth Equation.
So, our Personal Wealth Equation starts with our income. And after we take away our expenses, we are left with a surplus. With the surplus, we invest it. We get a return. And if this return compounds over time, we should reach our goals.
So, there are really two sides to the Personal Wealth Equation, the left side and the right side. The right side is the investment side. And if like what the gentleman said, the senior gentleman has said that we don’t really have to worry too much about the right side because if we stay invested over time, we will get the returns. And so, if you don’t have to worry about the right side then really, we should focus our attention on the left side.
So, what do we focus on?
We focus on firstly, how we can increase our income. How we can reduce our expenses so that we get a larger surplus. And we do that through budgeting. We also focus on how we can protect ourselves against the loss of income, perhaps due to death, disability or a medical condition.
The left side is really the short-term side that we should focus on because we know that the long-term side will take care of itself.
And you know, during lunch, this senior gentleman also said that he has spent many years thinking about how he can get the returns from the right side when he really doesn’t have to because it’s really simple just to stay invested and get returns. He now wants to focus his attention on the left side, on how he can use what he has, to impact lives. And I think that’s wisdom.
Now, if you want to find out more about how you can get the returns over the long term, please call us for an exploratory discussion. Thank you so much for watching.
For more related resources, check out:
1. Financial Planning for Merdeka Generation Part 5: A Medical Safety Net
2. Thoughts & Reflections From Hong Kong: Why Is Investing So Difficult?
3. Don’t Make Long-Term Decisions Based On Short-Term Information
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