To recap from my previous post:

Invest – risk capital to capture (outsized) capital gains and/or income.

Saving – seeking conservative yield in return for no risk to capital (in nominal terms).

Why in nominal terms? Well, if you include inflation adjusted returns, it gets us no where since you and I know the CPI is just a statistical index. What we chose to include and exclude, we can manipulate it to whatever we want to show.

For eg, if CPI shows inflation is 3.5%, then voluntarily contributing to CPF OA to get the 2.5% interest is “dumb”… When it isn’t necessarily so. Especially when the more you invest, the more you lose… Ouch!

I am also excluding bankruptcies to banks and insurance companies, collapse of governments, regime changes, tsunamis, earthquakes, fire and brimstone scenarios. I think you know why.

But its not unimportant.

This scenario is relevant when you are super rich. That’s why you see the super rich spread their assets and money across different geographic jurisdictions and their wealth denominated in different currencies.

Just look at the rich Indonesian tycoons. They even send different members of their family to different parts of the world. One daughter in Hong Kong, one uncle in Singapore, one nephew in New York, another cousin in London. This way, if the patriarch is jailed or purged, the business empire will carry on.

Chose you own poison; not offered by others

Is the above invest and saving distinctions important?

No and yes.

If you know what you’re doing, then its not important.

But if you are easily “sold to”, then it may help to find out whether you can accept losses to your capital and seek the “right” instrument or vehicle accordingly yourself.

Examples of mismatches of what you think and reality

  1. You regularly saves $2000 per month to your savings account as you are clueless to investing. However, that sweet tight skirt at the bank convinces you that you’ll get a much better “interest” return if you channel that $2000 per month to a regular monthly “savings” program into the STI ETF. After all, in the loooooong term, the projected return is 8% right?
  1. That insurance “friend” of yours persuades you that you should “invest” and not let money rot in the bank. So you bought wholelife and endowment policies thinking that you are “investing”. Which is not so bad by itself if you wish to have a comfortable nest egg by 65, but if you have delusions to be financially free by 40…

When successful “savers” are most at risk

Have you read in the papers some victims of scams are in their late 50s or 60s? And the amounts they have lost are in the hundreds of thousands!?

You would wonder how on earth these people with some many years of life experience under their belts can be so “bei kambing”?

Same goes for the big amounts of money some of our retirees have lost “investing” in properties and stocks once they have access to their CPF funds.

What gives?

If all of your whole adult life you have been “invested” in saving instruments and vehicles, its understandable when you have access to hundreds of thousands or even millions in your 50s or 60s, you would think you are “better” than your peers.

Forgetting that money you have, but you have not built up your craftsmanship in investing all these years.

The reason for starting young in investing is not the power of compounding so evocated by so many books. That’s the saving route.

The main reason for starting young is so that you get yourself inoculated by the slings and arrows of the investing arena.

You personally have lived through a few bull/bear cycles, know how it felt to swear buy and hold only to see your stock goes to zero…

Experience the euphoric highs of a 10 bagger, forget to take money off the table, and let it turn into a 2 bagger. You didn’t lose money, but still…

Say your REITs are under water by 20% but if you add all the dividends collected, you are breakeven. Then realise that’s not the purpose of income investing – use the bricks of the eastern wall to patch the hole in the western wall? You invest to breakeven?

Know yourself

Its much better to lose all your money in your 20s than in your 60s.

The best reason to start investing early is to know yourself.

Without doing, how to know whether you are cut out to be an investor? There’s no shame in taking the saving route (OK, harder to impress that “chio bu” at the pub; but you’ll attract the gold diggers).

The majority of investors lose money.

The majority of savers will have money.

And now the distinction is important!


Singapore Man of Leisure (welcome to my blog; just google it!)