The focus has turned to the markets this week. Here are some things to catch up on.

gold link pocket watch

Compounding requires Absorbing Damage so You’re Never Forced to Quit (Investment Moats)

Kyith has a post that I think underscores that in order for compounding to work, it takes time. And throughout that period of time, things can (or should I say, will?) get pretty nasty sometimes.

For me, the interesting bit is that I never knew there was an ishares ETF that tracks the Singapore market. Kyith’s example about how buying this ETF at its inception* during the highs of the Asian Financial Bubble led to paltry returns over the next 21 years is also very illuminating.

In short, if you buy when markets are expensive, you will live to regret it.

 

New cooling measures: The show has just begun (Property Soul)

Vina at Property Soul has come out with her take on the new ABSD measures and what it means for the property market in Singapore. I’m pretty sure many of you may have already read this but FWIW, stay tuned to her site for more in the coming days.

 

Some Considerations For Investing Globally (A Wealth of Common Sense)

Ben Carlson has a great post on the case for investing globally. He’s written it from the perspective of an investor in the U.S. but of course, the same would apply for someone outside of the U.S.

What’s interesting for me is how the S&P 500 and MSCI EAFE (which represents investing in developed global markets) have taken turns to outperform one another.

While the simple case would be to invest equally in both and rebalance periodically, the more enterprising investor could invest in one, and then start switching to the other as valuations become relatively cheaper in the other.

Also, based on the table, might it be suggesting that in the next period, markets outside the U.S.? From a valuations standpoint, it certainly seems possible.

 

Mainland developers are ‘money mills’ that rely on spiralling asset prices (South China Morning Post)

Many people have been warning about credit bubbles in China for some years now. This opinion piece provides a look at the mechanism by which the credit bubble has developed. If this is true, then the stock markets in China may be on to something after all. And if it bursts, then expect HK and SG markets to be badly affected as well.

 

Wealth Is What You Don’t See (Fervent Finance)

Sustaining Wealth is Harder Than Getting Rich (A Wealth of Common Sense)

Finally, on the personal finance front, two different articles which highlight what should be obvious truths.

The first one makes the point that for most people, getting wealthy is a result of cultivating good habits with money — being frugal and thrifty are sufficient components to getting rich.

I personally know a few colleagues who have been mid-level civil servants for a good 30 years and right now, they would easily qualify for the top decile in terms of net worth. Yet, they watch every dollar. To them, the best meals are the ones in the hawker centre or coffee shops. They fly economy because it’s cheaper and they would never stay in a 5-star hotel unless it came at a good price. They are some of the most practical and humble people I know.

The irony is that some of the kids we teach think buying Yeezys or NMDs, which cost hundreds of dollars, and 80-dollar T-shirts show that they are rich. What they don’t realise is that the guy standing before them in the classroom could be worth millions, never have to work another day in his whole life but is wearing a $20 polo tee and sport shoes he copped at a sale.

The second one makes the points that getting rich and staying rich are two different things. You may have gotten rich through a lucky break such as riding the wave of an industry that’s experiencing unprecedented growth or an inheritance. But staying rich takes much more than that.

You can’t spend like a drunken sailor (which is essentially what Johnny Depp did) and expect to remain wealthy. This is why the Chinese have a saying that “Wealth doesn’t last three generations.”

In my life, I’ve seen how some of my extended family behave and everything is playing out according to the pattern above. In my family’s case, it may even be accelerated. The first generation built the wealth through sheer hard work and grit. The second generation has grown it (somewhat) but my generation, the third one, is pretty much spending it away.

 

 

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