Asked on 17 Sep 2019
I’m currently in my 30s, with a monthly salary of $5k per month.
Have purchased a whole life policy of 500k and an ECI term plan+ hospital plan.
I have an existing housing loan of 600k, no other liabilities.
What would be the best way to invest this inheritance? Or should I pay off my housing loan?
1.5 mio is a rather large sum of money so I suggest you take some time to think carefully about how to deploy it.
Firstly, let's look at your liability. How much are you paying in terms of the mortgage monthly? 1 mio invested wisely would provide you easily $40k/annum @ 4% which might be more than enough to take care of your loan, and perhaps even your basic expenses, with another $500K left over to have as a rainy day fund/warchest. If you are paying lesser than 4% interest on your loan (which you should be) then it probably makes more sense for you to invest your money conservatively and use the returns to settle the loan, rather than paying down the whole loan.
As for what asset classes to invest in, you would want to consider your risk appetite, combined with your preference of asset classes to determine how to deploy your money. Each asset class has a risk/reward associated with it and you should sit down with an advisor to understand all options available before committing to anything.
Ideally, a good way to deploy the funds would be a mixture of income-producing bonds, equities, UTs, etc, which can comfortably yield 4% without too high a volatility. The allocation of each asset class will be a matter of personal preference and risk appetite.
If you would like to find out in detail about the options available to you, you can contact me at [email protected] and I will see how I can assist.
Inheritance money is a bit tricky. Imo, you should donate some to honour your parents first. Fill your Medisave full, then the payments will overflow into your other CPF accounts. Fill your wife's Medisave so she will grateful. Then sit on the money learn about markets, alternatives and such. Wait till there is major market discount then pull the trigger. REMEMBER you are an accredited investor now. It opens up a whole new slew of opportunities. Take your time. Burn through your salary, not your capital. If you can support your current debt level, let nothing change but the level of knowledge and awareness. Don't quit your day job.
Congratulations accredited investor, welcome to better sleep.
27 Sep 2019
There are 3 ways to look at this.
1) Do you want to continue growing this 1.5m?
2) Do you want to just live off the stream of income this 1.5m can give you?
3) Or do you want a little bit of both?
Even at a conservative 4% return per year, you can replace your current income. And there's a way to not risk your capital at all and get 4+% annum return per year through annuities.
Or you can choose to invest in a conservative income portfolio with about 30% Equity 50% Fixed Income 10% Property 10% Commodity portfolio.
If you choose the right funds, you can expect a 3-4% annual Dividend Yield with another 3-4% p.a Capital Gain over a few years.
I also wouldn't pay off my housing loan too quickly, because it is still ok to keep as interest rates a relatively low.
One thing for certain is that I wouldn't take too much risk on money that was never mine in the first place. My parents probably gave that to me so that I don't have to worry about my basic necessities and can probably try and achieve whatever goals I had and make the world a better place.
If you'd like to speak to an independent financial advisor who could help you plan a lifetime of income and to grow this capital, you can always look for me. Do check my other answers on this forum to have an idea of how I like to work and my philosophy.
27 Sep 2019
Woah I have been seeing quite a few lucky kids inherit money from the sale of parents/grandparents condos lately!
First thing: Thank your parents/grandparents for the windfall. Treat them well and make sure the proceeds from the sale benefit them. After all, they bought the condo.
Now with that set-aside, I guess Hariz and the other respondents have already covered how to invest that money! Personally I would just put it into a high rental yield property and stocks, although I have not been tracking the former as closely as I previously did so am not sure what the current market conditions are.
1) I won't pay off my housing loan as the interest rate on such a secured loan is very low.
If you took a bank loan, you can easily refinance or reprice for 1.89% now.
If it's HDB housing loan, it's 2.6%, still not so bad.
2) diversify your recent windfalls. do dollar cost averaging, and make an effort to find out how you can DIY, because this "part-time job" may pay you more than your current job. Go google for IWDA ETF for the lowest cost-effective way to invest globally with a low tax rate (For the fund) and hence a low fund fee.
If you prefer Singapore stocks, go for STI ETF.
Actually I can't think of other returns better than IWDA and STI ETF unless you are a stock picker. Other than that, I honestly won't put the money (if it's me) elsewhere.
Maybe keep in the bank a small sum for emergency (good or bad)?
I have no idea whether you are happily employed, if you are not, you can take a tiny portion to learn some business skill sets.
Also, if you are married, do discuss with your spouse on IWDA ETF, and any business potential and any needs.
Other than your spouse, I say don't have to tell other friends or relatives of this recent amount.... Have a good interesting journey.
PS: oh yes, pls do donate a small sum to a charity that both your spouse and you would be keen in. A small sum of money that will do wonders for clarity on your life ;)
Still keep your day job and work at it :)
Asset allocation depends on an individual's time horizon and profile.
Some people are contented with rolling fixed deposits amongst different banks.
There’s SSB option too. Risk of these two options is that the yields may be lower than your existing home loan. That’s where annuities and endowment plan comes into play. I won‘t suggest diving straight into structure products, unit trust, REITs and stocks right away.
Speak to more than one advisor and bank to get the Various options. Will be happy to give a general sharing. Feel free to be in touch.
Pay back your CPF OA amounts used for property purchase. You can't go wrong with this step. Putting back your OA is being responsible for your future self. It also grows at a risk-free interest rate. It also parks money where suddenly close friends and relatives cannot touch.
Then look at your debts. If you have no instrument that can outdo the bank loan interest, then clear the pty loans first, car loans, study loans...
Hi. There are many options opened up to you to grow your wealth but I suggest you don't dive into it without doing your own research.
First, on your mortgage loan, is it with bank or HDB? Current bank mortgage loan interest is very low. If you are still working and your CPF is able to pay back the loan, I will suggest you stick to it first.
For inherited amount, I will tell my clients to set aside some portion for liquidity and invest the rest of their wealth but yet also create options for liquidity and capital preservation. If you don't need this 1.5mil to settle any emergency matters now, consider portion some for
1) emergency funds (create liquidity)
2) investment (build up ur passive income and capital grow)
There is no standard answer on how you should Investment cos there are tailored made to an individual based on their preference, risk, time horizon and objectives. Speak to someone you are comfortable with to find out the available options.
Hope this help!