Build a nest egg? AI-Based Tools Help You Look Beyond Real Estate, Invest News & Top Stories


Ms Emily Lin (not her real name) surprised her friends when she wondered aloud at a rally: why do people buy their homes when it involves such a huge financial commitment ? Why not rent instead?

His argument was that with $ 10 million invested very carefully in government or statutory issues with coupons of around 2 to 3 percent, an income of $ 200,000 to $ 300,000 a year would be enough to pay the rent. , plus living expenses. No need to tie up your capital.

A friend replied that not many people have $ 1 million, let alone $ 10 million. Even so, Ms. Lin’s point is sobering.

Meanwhile, Mr. Matthew (assumed name) bought a house in Vancouver, Canada three years ago, a detached 2,000 square foot integrated house. In town to visit relatives and friends recently, he found that some of his highest paid peers in Singapore with six-figure annual salaries found private property (of a reasonable size) unaffordable.

Even then, they persist in their ambition; real estate is still viewed as a safe and steadily appreciating asset, while stocks and bonds are viewed as risky.

But buying private property may no longer be the best strategy for building a golden nest egg for retirement, according to a DBS research report released last month.

Mr. Derek Tan, Head of Real Estate Research, DBS Bank, said: “By studying publicly available data, as well as aggregated and anonymized information from 1.2 million of our retail clients, we were able to diagnose that the A person’s ability to retire well would be negatively impacted if one adheres to the adage that property is a “golden nest egg”, given changing demographics.

“Instead, we have found several investment alternatives that have comparable or even superior returns that a retail investor can consider in maintaining a well-diversified investment portfolio.”

Data from the DBS report, which looked at the total returns of different asset classes since the first quarter of 2009, found that real estate assets were outperforming the S & P500 and Singapore Real Estate Investment Trusts (S-Reits).

Drive the democratization of investment

In North America, where Matthew lives, it’s common for professionals and business owners to work with investment advisors to invest their savings as part of their overall retirement strategy. Most people own only one property – their home – in their lifetime.

In Singapore, more and more people are warming to the idea of ​​investing their excess cash with investment advisers as well, as these no longer serve only the very rich.

The use of technology could help to further democratize access to wealth management services. DBS, for example, is using technology to make portfolio management services that were previously the preserve of the very wealthy accessible to as many people as possible.

Its digiPortfolio robotic investment platform, launched in 2019, offers a seamless way to invest. While the minimum investment is $ 1,000, subsequent refills can be as low as $ 10. Yields, in percentage terms, can be double digits.

Market fluctuations due to uncertainties arising from the Covid-19 pandemic have led more people to participate in the stock market and begin their investment journey, said Ms. Evy Wee, head of financial planning and personal investments at DBS Bank.

And others do it with the help of robo-advisers.

Ms Wee said the number of investors signing up for a new digiPortfolio account or supplementing their existing portfolios tripled in December 2020, compared to the previous year.

“Currently, nearly two-thirds of our digiPortfolio customer base are young investors such as Gen Z and Millennials. “

An interesting observation is that clients who have invested in digiPortfolio include a mix of professionals from the engineering and manufacturing industries, rather than the more traditional corporate or financial services industries.

An average investment portfolio is valued at around $ 4,000, and these investors typically start with smaller sized notes before gradually building up their portfolios.

Almost 80% of digiPortfolio clients are invested in the Asia-focused portfolio. One of the reasons for its popularity could be that the portfolio is denominated in SGD, with all underlying exchange-traded funds (ETFs) listed in Singapore. This eliminates the currency risk for investors.

In addition, the portfolio falls under the category of Excluded Investment Products (EIP), which are investments considered “non-complex”. Novice investors can access EIPs without having to pass a prequalification of their investment experience.

Leverage technology for personalized advice

The bank’s investment process helps clients understand their risk profiles and goals, and aligns them with appropriate recommendations. Its digital advisory function in the DBS NAV Planner ensures that the investment advisory process is objective and transparent.

“This is another step forward in our goal of helping one million clients invest and insure by 2023, as we are able to leverage technology to extend its accessibility to even more customers, ”Ms. Wee said.

The investment products recommended by the digital advisor result from the match between the preferences and the investment risk profile of a client and the characteristics of a product which are complementary. For example, clients who prefer to spend less effort monitoring the performance of their investments will be referred to a professionally managed product.

“We augment the investment advice our clients receive with the expertise of our fund selection team, where we prioritize funds that are rated positively by the team and aligned with the current investment views of our Director of Fundraising. investments, ”Ms. Wee said.

Additional expert advice will help first-time clients overcome investment inertia, while savvy investors can make more informed investment decisions.

Another handy feature of the DBS NAV Planner: Investors can connect their investment accounts of different financial institutions using their Singpass ID for a consolidated view of their holdings securely in one place. They can also track the value of those investments on the go with daily price updates.

How investors can make their money work

With so many investment choices out there, it’s not uncommon for new investors to feel overwhelmed by information. One way for them to navigate this space is by using digital tools, such as the NAV Planner’s “Make Your Money Work Harder” feature, which recommends products suited to their investment profile.

Its yield calculator helps calculate how much your money can potentially grow if you start investing today, and compares the pros and cons of various investment products.

Young adults can grow their savings by using a personal deposit account that rewards them with higher interest when transacting with DBS in a number of ways.

For example, clients can get higher interest rates for their savings through the DBS Multiplier account by crediting their salary, using a DBS credit card, and investing in digiPortfolio. The lower fees are waived for new customers and those aged 29 and under.

Do-it-yourself investors may want to consider investment approaches such as the heart-satellite approach. This is implemented by building a ‘core’ with a combination of index investment funds and forming a ‘satellite’ with mutual funds or individual stocks that take advantage of trending themes and sectors that are likely to outperform. the market at large.

Another approach is the dumbbell strategy, which has exposures at both ends of the risk spectrum with few of them.

The writer, a former Business Times reporter, finds it difficult to track her investments; a robotics advisor is a pretty nice thing to have, and she dreams of the day a robot cleaner, robot cook, and robot driver will become a reality.

This is the latest in a seven-part series in partnership with DBS

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