Financial Nuggets Learnt from 2023

Well, I can't believe its 2024. All the video-gaming, munching and meet-ups in December certainly transformed me into a SERIAL PROCRASTINATOR. Nevertheless, a late reflection on the financial nuggets learned from 2023 is better than none I guess. Off the couch playing virtual football matches and onto the laptop I come.

2023 has certainly been a rollercoaster ride for many investors. Inflation seem like an untamable beast, resulting in the Federal Reserve Board (FED) raising interest rates to a multi-decade high of 5.25% to 5.5% by the end of the year. You know inflation is a real concern when even Channel News Asia does a documentary titled "Why is my Economic Rice so Expensive? How can I Save Money?" back in November 2023. Meanwhile on the global front, Israel's retaliation against Hamas in October threatened to turn the conflict in the Gaza Strip into a potentially regional one. Meanwhile constant mumbling of a recession kept retail investors on their toes and the list goes on. Well, I got to admit that on hind-sight, 2023 wasn't the easiest of times for ordinary retail investors. Although, if one takes a deep breath, there are actually financial lessons to be learnt. Personally I have taken away 5 financial nuggets.

1. Don't put all your eggs into one basket

Yes guys, I know this is a line that is over-repeated in tertiary and university business courses, online financial courses and the traditional newspaper. But a chance meet-up with an ex-secondary school classmate of mine at the gym lamented "OH SHIT BRO, I am losing more than 10k SGD due to my position in Alibaba shares." Hence, I asked him back "Why did you invest such a huge amount into Alibaba shares and how much is your overall portfolio size?" He replied "My overall portfolio is about 100k SGD and my initial capital invested into Alibaba was about 30k." That represents about a 30% weightage into a single company, and although I felt bad for him, I advised him not to accumulate such a huge position into a single stock. This was overly risky and over-concentration risk could lead to many sleepless nights. A suggestion would be to consider a broadly diversified exchange-traded fund (ETF) or a robo-advisor offered by our local banks or financial platforms instead. This lesson brings me to my next one.

2. Do not blindly follow the herd. In short, do not FOMO

"Why did you buy Alibaba shares in the first place?" I asked my friend. He simply shrugged and replied "My friend, who's a seasoned relationship manager at a local bank told me that Alibaba is under-valued and can 2X within 1-2 years time." He then went on to say that he didn't know better and as he had spare cash, it was better to invest now than let the money lose its value to inflation. This reminded me of the 2021 Game Stop Corp stock rise and bust, where many young investors simply relied on Reddit and social media posts, losing significant sum of money in the process. Some had even leveraged position, in short borrowing money they did not have to invest in Game Stop. Certainly low-cost trading platforms did not help. But rather than blaming the platform, or other users on Reddit or even unscrupulous financial advisors, it may be advisable to take a pause. As the old saying goes "If something is too good to be true, it probably is." 

3. Avoid accumulating bad debts, especially credit card debt

My friend then went on to update me "Hey you remember our fellow classmate Harry (not his real name)? Harry got into a massive credit card debt due to his excessive partying and drinking. To make matters worse, he only pays the minimum $50 monthly payment. Hence, I had to lend him a few thousand dollars." Hence, I replied "Doesn't Harry sell credit card for one of the banks in Singapore?" My friend nodded and cried out "What an irony bro." Hence, the short encounters shows that no one is immune from accumulating bad debts. It is thus advisable to always pay one's credit card fully, instead of simply paying the minimum sum, as the interest charges alone on late payments could amount to 3.4% to 3.8% a month! The raising interest rates over late 2022-2023 certainly doesn't help too. Such credit card debt could certainly snowball into a huge amount and in turn, affect not just one's finance, but one's relationships too.

4. Have an emergency savings of at least 3-6 months (This is dependable on your personal circumstances and its just a guide)

When I first graduated in 2017, and drew my initial teaching salary of $3,800 a month paid by the Ministry of Education (MOE), I literally invested at least 50% of it diligently every month. While this accumulated into a sizable investment pot, it certainly did not buff up my savings. In short, I wasn't saving at all. It was only in 2023, as I approached my wedding, and as me and my wife started shopping for home fixtures for our BTO flat that I realised the time old saying holds true "Always keep at least 3-6 months of savings for rainy days." While my wife and I had started a joint account back in 2019 where we each dutifully stashed away money via an automatic transfer, having adequate personal savings would have given me a greater peace of mind!

5. Get the necessary insurance, as life throws lemons at you sometimes

In late November of 2023, I got into a motorbike accident. Yes, I have already known that riding a bike is dangerous and SG drivers aren't the best. Thankfully, it was just a minor accident, and I got away with scraps and bruises. However, the repair bill on my motorbike amounted to a whooping $800 and because I only had the third-party insurance, I had to foot the $800 from my own pocket! This lesson has taught me not to be penny wise and pound foolish! Hence, my advise to my young (or maybe not so young, you see I'm already 32) and reckless self would be to go for the comprehensive motor insurance coverage. This applies to other areas of insurance you need, as best as possible, do ensure you insure yourself with the necessary accident, hospitalization, death and permanent disability insurance etc. which is so important. Personally, my advise would be to buy term and invest the rest, but everyone's take on this is different. Hence, just GET INSURED if you are not. 

All right, time to hit the sack. Have a fruitful, meaningful and fulfilled 2024 ahead. Peace out.

Yours Sincerely, 

Finance Kaya Toast

Disclosure: This article was written as me talking to myself as an ordinary Singaporean, wishing to achieve financial freedom. It does not represent any financial advise. All opinions are independent and represent just my two-cents on all matters financially-related.