Imagine this & what will you do?

[air_pork]

Hello all,

Been reading this section for quite some time. Imagine you have 800k-1mil spare cash, what will you do? Some ppl said, let the money work for you and grow more money.

Some said invest & put FD. What will you do if u have such amount of money in your bank. Welcome any reference such as FD, shares, bonds, property, or forex.

Eg. For an aunty will put all money in bank n earn interest in FD rates. How about you?

 

[frenchbriefs]

put into CPF.CPF is the bestest!!

 

[air_pork]

Cpf put in cannot take out right. Though interest 2.5% ..

 

[focus1974]

Best is buy Property for auntie!
But then.. buying property must time market..
if not, your breakeven will be 10yrs.

 

[Shiny Things]

Eg. For an aunty will put all money in bank n earn interest in FD rates. How about you?

This is a really great question, and it goes right to the hearts of differing attitudes about risk, and the eternal question of "how aggressive should my portfolio be?".

I have my favourite short-hand answer: "100 minus your age in stocks, and the rest in bonds" (or "110 minus your age in stocks", as it is right now because I think bonds are expensive). But that's just a rule of thumb - what you want to know is, why is that the rule?

The reason is that as you get older, your tolerance for volatility decreases. If you were 65 in 2008, and you were 100% in stocks, then you lost half your portfolio just as you were about to retire and you got absolutely f*cked. But if you were 25 in 2008, and you were 100% in stocks, then you still lost half your money but you're able to sit back and wait for the market to come back.

The idea behind "100 minus your age" (or "110 minus your age" or even "120 minus your age", which I think is just a bit aggressive) is that it forces you to scale down your stock holdings and move into bonds as you get older, which provides two things:
1) A less volatile portfolio, because it's more bonds and less stocks;
2) A steady stream of income from those bonds without having to go through the hassle of selling stocks to fund your retirement.

So it's not a bad idea for Aunty Mabel to be 60% in bonds if she's 70 years old and retired. She needs stability rather than the possibility of huge capital gains. But 21-year-old Billy-Bob shouldn't be 60% in bonds, even if he's convinced that the world is about to implode - because even if the world DOES implode, and stocks drop 50% for the second time in two decades, Billy-Bob can afford to sit on his hands and wait for the market to come back to him.

This (or a variation of it) is the idea behind the "target-date funds" that are becoming popular over here in the USA. Basically, you pick a fund that's targeted to the date you're going to retire (for example, Vanguard offers a "2015" fund, a "2020" fund, all the way through to "2060"); you just plunk your cash in the target-date fund, and Vanguard handles all the heavy lifting of scaling down your stock holdings and scaling up your bonds so you don't have to think about it. (This video explains the "glide path" - as Vanguard calls it - very nicely.)

 

[air_pork]

What a read. Agree with your thoughts. I guess those who have the holding power will have a last laugh. If for me, i will go for bonds cos shares not for my weak heart.

now buy property also have, cos bear in mind the monthly maintenance fee also eat into consideration for condo.

 

[CookieMonsta88]

Hello all,

Been reading this section for quite some time. Imagine you have 800k-1mil spare cash, what will you do? Some ppl said, let the money work for you and grow more money.

Some said invest & put FD. What will you do if u have such amount of money in your bank. Welcome any reference such as FD, shares, bonds, property, or forex.

Eg. For an aunty will put all money in bank n earn interest in FD rates. How about you?

Hi, it depends on a couple of factors, risk appetite, holding power and knowledge of the markets and how much time are you willing to spend managing your money(if you have lots of commitments then this may not be for u, like if u running a biz or something)

so if you want something safe and don't want the hassle of handling the position, put in treasury bills or fd is safest.

if you can tolerate some risk, but don't wanna manage the money, can try mutual or hedge funds.

if u do want to handle the position then stocks, bonds, forex, property, but u need actively manage the positions.

for me i will divide my money up, 800k put into fd or treasury bills, then 200k put into hedge fund, and then the year output from the 800k which may be 8k assuming 1% interest, i will invest inside stocks or forex.

so at least the 800k principle is safe, while not sacrificing opportunity cost.

 

[focus1974]

Shiny Things,

Maybe you can start a Thread "Shiny Things"...
you provide good answers and a lot of people got qns to ask

1st question from me
You know normally those ELNs and DCLN .. you need volatility to price a high yield.
is there any website where we can find out the estimated theoretical yield (of coz, ignoring spread taken by banks) for a spot price and a trigger price?

 

[Shiny Things]

Shiny Things,

Maybe you can start a Thread "Shiny Things"...
you provide good answers and a lot of people got qns to ask

That's not a bad idea actually - but I like hopping into the threads where the questions are. It's more fun to go to the questions than have them come to me.

1st question from me
You know normally those ELNs and DCLN .. you need volatility to price a high yield.
is there any website where we can find out the estimated theoretical yield (of coz, ignoring spread taken by banks) for a spot price and a trigger price?

Not really, no. There are a whole lot of headaches:
1) You need the implied-volatility data. There are places to get this in some asset classes - it's pretty easy to get your hands on US stock vols from iVolatility - but FX and non-US stock vols are a nightmare to find. And you need more than just the at-the-money vol - you really need the whole vol surface to price it properly;
2) You need the vol surface generators and pricing models. If it's anything more than just a dual-currency deposit or a simple ELN reverse-convertible with no trigger, you need a better pricing model than the ones you get in your university textbooks. This is the sort of stuff that banks pay their quants mid-six-figures to build for them, or the stuff that smaller banks pay $2k a month for a Bloomberg to be able to price.
3) You need to understand the product in the first place. I do a bit of this sort of ELN-reverse-engineering for clients, and some of them are horrifically complex - I'm talking "you have to write a script to describe the payoff" sort of complexity. That's kind of the point of these products for banks - they're so complicated that they're impossible to reverse-engineer, so you can't tell if you're being taken for a ride.

Surprisingly enough, in my experience the hard part is finding the data; I can usually reverse-engineer the products with a little bit of thought.

If you're worried you're being ripped off and you've got a particular one you'd like me to take a look at, drop me a PM.