It was lunchtime. I was famished.
Thankfully, I was standing in the middle of a hawker centre. Where better to sate my hunger than at a place where the choice of available foods is surpassed only by their affordable prices?
On offer was Nasi Lemak. Boy, do I like Beef Rendang, Achar and Coconut Rice. Then there was Hainanese Chicken Rice. Wow! Succulent Poached Chicken sitting on a plate of rice cooked in chicken stock.
Then there was the ever-popular Mee Pok. A bowl of comfort food laced with chilli and a hint of vinegar.
But I was in a quandary. Should I opt for instant gratification or something that could provide lasting benefit. I’ll reveal what I decided later.
At a crossroad
Thing is, in finance as in life, we are continually faced with choices….
…. For instance, should we buy a cup of frothy cappuccino or should we skip the morning coffee and put the money towards our pensions instead? Should we buy a car or stick with public transport? Should we join a gym or save our money by walking to and from work every day?
When we invest, we are faced with myriad choices, too. Should we put our money into safer instruments such as bonds and time deposits?
Or should we opt for income-producing shares instead? What about growth shares? There are also value shares that could provide instant gratification if they should pop.
Invest by category
Point is, there is no one-size-fits-all investment. If there is, then investing would be so much easier for all of us.
The next best thing, though, is a portfolio of different assets.
We should try to categorise our investments and adjust the proportions of each group as and when our personal circumstances change. It is so much easier to control what we have if we know what we own.
A typical portfolio might be made up of around 60% income-generating instruments such as bonds, cash and REITs. These are unlikely to grow quickly. They are designed for comfort rather than speed.
Another 30% could be assigned to faster-growing shares. They could be more volatile than income shares. But the volatility of the entire portfolio could be made more acceptable if the income portion continues to deliver reliable payouts.
The rest of the portfolio could be used to buy more speculative investments, if we like, such as value shares and small caps if they look compelling enough.
Be flexible
The proportions don’t have to be set in stone. If anything, they should be adjusted as our lifestyle changes over time.
Younger investors might be able to tolerate a higher proportion of growth shares at the expense of income. That’s because they – being younger – have a longer time horizon to recover from any setbacks in the market.
Older investors might prefer more income shares, given that their days of nine-to-five working could be a thing of the past.
This robust portfolio of investments can be put together at any stage of our lives. In fact, the earlier we start the portfolio, the better.
Huat, huat!
We could even think about building a portfolio for our children. This could be particularly relevant since Chinese New Year is just over.
We could start by putting away some of that Ang Pow money that our kids received….
…. every $100 that we put away at the start of the Year of the Rat could turn into $250 the next time the Rat returns in 2032.
Enough about investing and back to my choice of food at the hawker centre.
Nasi Lemak, of course – a good balance of protein, carbohydrates and fibre. It was a big plate of food that was too much to eat in one sitting. So, I took the leftovers home because today’s leftover is tomorrow’s lunch….
…. I do something similar when I invest. I put away any spare cash that I don’t need for the next five year into shares because someone is sitting in the shade today because someone planted a tree a long time ago.
If you’d like to learn more investing concepts, and how to apply them to your investing needs, sign up for our free investing education newsletter, Get Smart! Click HERE to sign up now.
Get more stock updates on our Facebook page or Telegram. Click here to like and follow us on Facebook and here for our Telegram group.
Disclosure: David Kuo does not own any of the shares mentioned.
