A painful but manageable landing

It seems we are back to the good old "bad news is a good news" cycle when disappointing macro data fuels hope of central banks curbing their plans for monetary tightening. Market attention has shifted from inflation uncertainty to fears about a slowdown, enabling stocks to make gains since this assumes the Fed doesn't go as far as previously feared to tame inflation and has to reverse course sooner. And indeed, many economists are now revisiting their growth scenarios.

I expect lower GDP growth in the US and the Euro area than the two central banks, but it's precisely the reason why I think they won't tighten as much as what they are communicating, which may offer some relief to the markets by the turn of the year. While the most likely single scenario in my view is for a soft-landing, sentiment is likely to remain fickle, and this is not a market to position for any one scenario with high conviction. 

With so much uncertainty around, MSCI did a stress test to see how European financial markets would react in four economic scenario and obviously, soft landing matters, a lot. For a diversified portfolio consisting of European equities, bonds and real estate, the impact ranged from a 10% loss in the 'stagflation' scenario to an 8% gain in the 'soft landing' scenario. 

Markets are liking the mood music with world stock extending gains after posting their biggest single day rise in more than 3 months on Friday. The dollar is struggling versus its major rivals and 10 years Treasury yields are hovering around 3.13%, well below more than decade highs of 3.46%. 

There is plenty of events this week that can trip up the fledgling rally. First up, the European Central banks annual forum in Sintra will be a key highlight with ECB President Christine Lagarde and Federal Reserve chair Jerome Powell both attending the meeting. Hopes inflation may be peaking will be tested this week when the US PCE price index, the Fed's favored inflation gauge, is out on Thursday and closer home, the UK will be releasing Q1 GDP, current account and final June manufacturing PMI. 

And finally, Russia looked set for its first sovereign default in decades as some bondholders said they had not received overdue interest following the expiry of a key payment deadline a day earlier. 

 

Retirement plan before 40 is early !

Myth: A retirement plan before 40 is too Early.

Reality: What does retirement look like for you?

Is it luxury retirement abroad with enough income to fund your lifestyle; travelling across the world or choosing to work because you want to, not need to and on your own terms with time for your hobbies? 

Saving is not only about making sure you have things that you would need at retirement, but everything to enable your dreams to come true and achieve your future perfect - be it a dream house, the best education for your children, or that coveted car. 

As inflation soars to its highest level in a decade, maximizing your pension allowances becomes even more important for protecting your retirement income. Rising prices could damage your spending power in retirement. 

The longer your money is invested, the more it can potentially grow - thanks to the power of compounding. 

Let time work in your favour and let your money work as hard as you do! 

Successful Financial Planning

Successful financial planning means you don't end up with too much or too little money. 

If you end up with too much, you could have experienced your money more. 

If you end up with too little, you experienced your money a bit too much and may be limited in your choices. 

The art is to find the balance between the two.

Enjoy your money during your life, but also give yourself the financial flexibility to make future decisions because you want to, not because you have to financially.

Do I need a financial plan?

 I would like to address the question, "Do I need a financial plan?"

I am going to give you an answer that might surprise you...

The answer is No.

Let me give you a hypothetical scenario:

What if you were a 40yr old had $5m in liquid net worth?

From a financial planning perspective, is this person doing well?

Most people would answer “YES!”

Now, what if this same 40yr old inherited $100m two years ago?

In this example, they had burned through 95% of their inheritance in two years.

Now let us re-ask the question, how is this person doing?

Most people would answer “probably not so well."

You see the problem with a financial plan is that it only tells you where you are at today.

There is no concept of where you have been.

In fairness, it should tell you the appropriate next steps of where you need to go.

The value is not in the plan.

The value is in the ongoing planning.

As soon as a financial plan is put into place, it is wrong.

Now, we hope that we are less wrong by having a plan than by not having one at all.

We believe that the ongoing monitoring of the plan is where the magic happens.

To make adjustments & course corrections.

The planning must be greater than the plan.

Do you need a financial plan? Not really, but you do need ongoing financial planning.

Financial Tips

I'm not saying I can guarantee to make you a millionaire. But I believe it's possible with good planning that you could make it there. 

I've set myself a personal goal to make, and my friends, millionaires by the time we reach retirement.

Some tips would be:

- Make savings a priority.

- Invest early and consistently.

- Cut unnecessary expenses

- Discussion with finance professional.

- Put your plan on repeat.

"Commitment is Key."

I used a compounding calculator to get an idea of how I can get there. If I put $250 per month consistently, with an average return of 8%, after 39 years I could achieve a fund value of over $ 1 million. The most shocking part is that around $800,000 of this is the interest earned over that time. 

Why work so hard all of your life during your career, to have nothing to show for it at the end? Be smarts and make your money do all the hard work for you. Time really is key here, as the sooner you start the better.

Common Mistake: 

> Most people think they don't need financial planner or advisor, and loose most of their hard earned money. Always discuss with your financial planner and/or advisor. 

> Most of the time people think only investing in mutual fund or insurance is sufficient for them which is obviously not sufficient for their financial goal. Always invest after discussion with your financial planner or advisor.