While the writer offers sound advice, I believe that there are better ways to invest one's money:
Contribute to the Supplementary Retirement Scheme (SRS) and enjoy a tax relief
For a person with a marginal tax rate of 14 per cent, a $10,000 contribution means he would be better off by $1,400.
The amount in the SRS account can be used for various forms of investments, and can be placed in endowment funds, unit trusts, stocks or cash savings.
Upon retirement, your tax rate is likely to be lower, and only 50 per cent of the amount withdrawn will be taxed and withdrawal can be spread over a numberof years. There is a penalty for early withdrawal.
Contribute to non-working spouse's CPF Special Account
The sum will then earn 4 or 5 per cent interest, risk-free. The first $7,000 of the per-year contribution will also earn tax relief from Nov 1.
Buy short-term Singapore Government bonds to earn interest over 1 per cent
There is no default risk or foreign-exchange risk. For short-term bonds, the interest rate-risk is also low, and bond holders can always get the principal sum back after a short wait, even if new issues with better yields come into the market.
Invest in several low-cost, well-diversified global or regional funds that have shown consistent, reasonable performance over the last five to 10 years
Better still, have a regular savings plan that uses dollar-cost averaging, so that you don't have to worry about market highs and lows.
You invest the same amount, say, every quarter, buying more units when prices are low and fewer units when prices are high.
You can enjoy the freedom from bother, and your money compounds at a faster rate over the long term.
Pay up your mortgage loan or other debts
As long as the mortgage interest is higher than what the saving or fixed-deposit accounts are giving you, you will be better off.
Of course, you still need to keep a certain amount of cash for rainy days or for a major commitment in the near future, such as a pricey holiday or your child's university education.
The lessons one learns after getting one's fingers burnt are invaluable. Swearing off stocks and shares after one bad experience is like paying school fees without being able to graduate.
