| What does the government say? To quote Singapore's Minister for Community DevelopmentAbdullah Tarmugi last year (2001) when he kicked off a campaign to highlight the importance of financial planning: "All of us must cultivate the habit of financial planning and managing the resources we have available while we are working, so that we can continue to live according to our desired lifestyle in our old age." The Singapore government is taking a serious view towardsfinancial planning because there is a growing realisation that many Singaporeans are taking too much comfort in their CPFsavings as a source of retirement. In early August last year, the Ministry of Community Development joined hands with the CPFBoard, the Financial Planning Association of Singapore andother agencies to launch a three-year national campaign toeducate Singaporeans on the importance of financial planning. Among the changes already implemented at the start of thisyear, CPF members will no longer need to set aside a MinimumSum under the CPF Investment Scheme. Savings in the SpecialAccount can also be used to invest in less riskyretirement-related financial instruments. These changes mean that you will have more autonomy tomanage your CPF savings and beat the meagre 2.5 per cent to 4per cent returns that you are currently getting. But it also meansthat you will have to exercise greater care and practice duediligence. Not quite a nest egg Studies have shown that CPF savings alone are insufficient to tide Singaporeans over their retirement comfortably. For example, according to the CPF Board, in 1998, the median CPF balance of members at the age of 55 was $129,974. This is clearly insufficient to fund 20 years of retirement. So how do you plan for a secure future so that you can sleep in peace? First, make sure that you are not spending beyond your means. Sit down, calculate your monthly expenditure and make sure that your monthly income is sufficient to cover it. If not, you should see where you can cut back to ensure a positive cash flow. Seek to invest wisely. One way to do this is to be kept informed and to educate yourself. Read the newspapers, financial magazines, books and gather information from sources such as the Net. When investing, practice two cardinal principles --diversification and dollar cost averaging. Diversification reduces risk. Products like unit trusts are built on the principle of diversification. Reduce risk by accepting risk andrecognise that risk also represents opportunity. Dollar cost averaging is another way to manage risk. It effectively represents time-based diversification. Instead of trying to time the market, you may want to develop a regular investment programme whereby you purchase on a monthly orquarterly basis irrespective of the price of a security. Dollar cost averaging allows you to apply the power of compound investing. If you invest just $300 per month at 12 per cent, you will effectively become a millionaire at the end of 30 years! Consider unit trusts You are probably wondering what sort of investment will be able to yield you 12 per cent returns. You may want to consider investing in unit trusts. Studies have shown that if you practice due diligence and invest in the right kind of unit trusts, a returnof 12 per cent is achievable. So punting in the market for quick gains is not the smart way to get rich. The smart way to investing is to do your research,moderate your expectation to a 10 per cent to 15 per cent return per annum and think long term. Simple enough but only you can make it happen. Take a look at NTUC INCOME's Champion product |