SGD 12 million is up for grabs in this year's "Toto Hongbao Draw"! Many have given their shot at it with the news reporting lengthy queues at various Singapore Pools' outlets across the island. It is undoubtedly a windfall to anyone lucky enough to win the top few prizes, considering how unceremoniously low the odds are when it comes to hitting the jackpot in Toto (you are more likely to get killed by an asteroid than to win according to statisticians!). Many also fantasise what they would do if they really win the grand prize, be it spending some on a beautiful house or fanciful car, treating yourself and loved ones to a splendid or romantic holiday or on other leisures and pleasures. In this "Idea of the Week" segment, we share what you could do if you won the grand prize of 12 million in 2017's "Toto Hongbao Draw".
Firstly, Pay Yourself
A bulk of our big ticket purchases in life are usually done via credit and loans. Although not all kinds of debt is usually bad, it is usually a good rule of thumb from a personal finance perspective to make sure you control your personal debt levels, reduce as much as possible to make sure you are not too highly levered. With that lucky grab of 12 million, you may want to consider setting aside a portion to clear some of your loans first. Consulting your personal financial advisor would be a prudent and perhaps necessary step as well, aiding the process of prioritising your objectives and adjusting your financial plans accordingly. You may also want to consider some insurance policies should you feel it is necessary (check out what we have here).
Next, Devise An Asset Allocation Plan & Invest!
The power of investing is clearly shown when your money 'works for you' and provides you a stream of regular income that you can live off. With the grand prize of 12 million, there is a rather sizable amount that you can put to work and invest, but you would need to devise a proper asset allocation plan to designate how you would manage your pot of gold. Your asset allocation plan would also be highly influenced by your financial objectives and your individual risk appetite (consulting your personal advisor as mentioned earlier would help in this). For the sake of simplicity, we will assume you are a middle-aged investor who wants a combination of regular income and moderate growth of assets.
Perhaps after clearing the first step of paying down on some debt and prioritising your needs and objectives, you now have about 10 million out of that hongbao draw prize that can be set aside for investing. You may want to diversify it across asset classes first, perhaps purchasing one or two private properties that have potential for capital appreciation and decent rental yields that can provide an income stream. Let us assume you are left with 7 million after this step, and you are wondering you should do next?
If you feel you lack the time needed to learn the ropes to invest or find it difficult to manage that 7 million by yourself, why not consider our newly-launched robo-advisory portfolios – MAPS? An acronym for “My Assisted Portfolio Solution”, FSMOne’s MAPS was developed to help investors navigate the financial landscape in a stress-free manner by offering them a one-stop portfolio solution. Our service features an array of five portfolios with differing risk levels and with investors being able to select between an income-themed or growth-oriented portfolio for each of the five variations. With as little as SGD 5,000, an investor in MAPS would be able to select a portfolio that is closely suited to one’s needs and risk appetite as well as gain access to a well-diversified portfolio that features a mix of both unit trusts and exchange-traded funds to achieve a good balance between active management, product diversification and flexibility! Our research team will do the homework for you, analysing the financial markets as well as product development trends to ensure the portfolio remains relevant and appropriate to navigate the global markets. With MAPS, you get to leverage on our professional expertise of portfolio construction and product selection across market cycles, saving you much-coveted time. For more information, we have compiled a list of commonly asked questions here.
Additionally, you can consider holding onto several bond issues after having a core allocation to MAPS. At FSMOne, we offer both wholesale bonds as well as retail bond issues for your consideration! You may pick anything from a quasi-government, high-quality, investment grade bond to a high yielding, non-investment grade corporate issue. If you are gunning for capital preservation and a desire for a regular income stream, owning several bond issues (with both investment and non-investment grade) with the rest of your Toto prize money is a possible option as well. If the stream of regular income from those bond yields exceed your frequent expenses, congratulations, you have attained financial freedom!
With this diversified portfolio of assets as explained above and as shown in Chart 1 below, you stand to reap the benefits of being a multi-millionaire – possessing diversification (which helps in capital preservation), moderate capital appreciation, as well as a regular income stream from the underlying assets – not too shabby indeed!
Chart 1: Your Sample 'Hongbao Draw' Portfolio!
At FSMOne, we have a one-stop solution for your ‘Toto hongbao’ portfolio! If you have any queries or doubts needed to be clarified, feel free to always contact our warm and friendly team of Investment Advisors!
Last But Not Least, Spend The Remainder & Treat Yourself!
Whatever that is left after you have worked through the earlier 2 steps would be your ‘free-and-easy’ money, your discretionary pile for you to perhaps pamper yourself a little and enjoy the finer, splendid things in life. It could be that holiday you have always dreamt for; an exotic discovery of South America, a luxurious cruise across the Mediterranean or a camel ride across the Valley of the Kings in the Land of the Pharaohs. It could also be a posh highly-rated Michelin Star restaurant that you always wanted to try. Get creative with this!