Q MY MOTHER is expecting to receive a windfall of about $800,000.
She wants to invest in property but feels that now is not the right time as home prices are too high.
Therefore, she is looking to park the money in a financial instrument for the next three to four years before buying property.
Please advise:
1. Where would you suggest she park the money so that she can earn decent returns for the next three to four years?
2. In your opinion, do you think property prices will cool off in the next few years?
A IF YOUR mother has already made a decision to invest in residential property but would like to time the purchase, a moderate-risk investment portfolio that is invested globally and across different asset classes should be considered.
Such a diversified portfolio stands to benefit from delivering relatively high returns for a given level of risk.
It would also be an added advantage if this portfolio has the flexibility to allow increased weightage to sectors that are fundamentally attractive, as this will further optimise returns.
It is worth noting that both the local stock market and the residential property market mirror Singapore's economic performance closely. As such, investing purely in local stocks is not likely to diversify away from the very risk that your mother is keen to avoid.
It is unlikely that the residential property market - whether HDB or private, will experience a major correction over the next three to four years, as there is no major supply overhang.
Also, it is not in Singapore's interests to see prices skyrocket from their current levels. The Government, which continues to be a major influential factor in the property market, is likely to see to that.
From a financial planning perspective, it would be circumspect to review your mother's asset mix in order to avoid the common pitfall of overconcentrating one's financial net worth in a single asset class.
A comprehensive financial plan should be able to address this issue as well as to better ascertain her overall needs and risk profile.
Geoffrey Ying
Head, Mortgage Division
New Independent
Advice provided in this column is not meant as a substitute for comprehensive professional advice. E-mail questions to a1admin@sph.com.sg.
