This Week at a Glance…

i) US market surges to an all-time high.

The S&P rallied past 5,000 points on the back of strong earnings, representing a 21.48% gain in the past 4 months.

ii) Mindful ways to use your Angpao money.

Depending on the generosity of your family and relatives, you can rake in a substantial amount of money during CNY. But before spending it on a new bag, wallet, or extravagance that you do not need, there are a few things to consider.

Scroll down to read the details.

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The S&P clears a new all-time high

It’s an understatement to say that 2024 has started off with a bang.

Global equities climbed to more than a two year peak last week, while major US indices (Dow, S&P, Nasdaq) all closed at a record high.

The rally is looking to stretch on this week on the back of strong corporate earnings, led by large cap tech stocks.

To give you an idea of just how parabolic this rally has been, the S&P marched 21.48% in the past 4 months, which is close to its 2023 gain of 24.06%.

Typically, US indices appreciate by 8-12% annually.

For it to more than double its 2023 returns is already an impressive feat, and we’re not even talking about the surge in the past 4 months.

“I want to invest in the US market, but it’s too high now. I guess I’ll wait.”

This is probably what you’ll be thinking.

Here’s some good news: it’s never too late, no matter the price. 

Rather than focusing on how high or low markets are, try looking at what your portfolio requires.

If your goal is to have a 30% exposure in US equities but you currently have 0%, you could consider to enter instead of waiting for a pullback that never happens.

Minor fluctuations (~5%) in the price don’t make a significant difference in your portfolio over the long run.

“But what if the market underperforms this year?”

In this case, the weightage of US equities within your portfolio will decrease, prompting you to invest more and “buy the dip.”

This can also work in reverse: if the US market continues to outperform to the extent that you’re overexposed, then you should take profits to rebalance your portfolio.

This principle can be applied to any investment in your portfolio, especially to volatile assets like Bitcoin.

Here are a few ways to get exposure to the US market:

i) Handpicking major US stocks (Apple, NVDIA, Meta, etc.). I generally do not like this approach, because companies come & go and can be easily replaced.

ii) Investing in the entire US market (or a large part of it) through ETFs such as QQQ, VTI, and VOO. My most preferred option because the fees are extremely low and you do not need to frustrate yourself on which funds/stocks are the best.

iii) Investing in unit trust funds or actively managed funds that have exposure to the US market. Can potentially net higher returns compared to option (ii), but these funds typically charge more fees too.

Options (i) and (ii) can be done through Rakuten Trade.

There are a variety of choices for option (iii), including Versa’s Growth Fund, GOInvest’s Global Titans Fund, and Public Mutual’s Aggressive UT Funds. Just make sure to compare the fees before investing in them.

Why fees matter when investing

Let’s assume that you’ve picked an aggressive fund that returns 7% per year on average at the cost of a 2% annual fee.

Every month, you top up RM500 and continue doing so for the next 15 years.

After this period, here’s how much you’ll receive:

• With a 2% fee: RM134,026.95

• Without a 2% fee: RM159,202.58

RM159,202.58 is almost 20% higher compared to the option with fees, which is why over the long run, sales and management costs will largely impact your returns.

I received RM500 in angpao money this year. What should I do with it?

Ahhh Chinese New Year, when relatives, aunties, and uncles have the right to judge how you’re supposed to live your life at the cost of an angpao.

Jokes aside, I generally approach judgemental questions (ie. when you getting married? Still no GF yet?) with a positive mindset.

Rather than replying them half-heartedly, I thank them for their concern and ask them to pray for me. 😂

But that’s not the main point here.

Depending on how benevolent your family and relatives are, you can receive quite a huge sum of money from angpaos alone. I received 15-20 red packets, and the combined sum is roughly RM570. Huat arh!

Often, it’s very tempting to immediately spend the money on lavish meals or things that we do not need.

Before doing so, make sure that you’ve considered these few things:

i) Have you built an emergency fund?

Rainy day funds are essential so that you’ll have some buffer during unfortunate events (ie. Job loss, accidents, etc.).

The recommended amount is to have 3-6 months worth of your expenses, so if you spend RM2,300/mo on rent, utility bills, food, and necessities, then your emergency fund should be at least RM6,900.

Store these funds in FDs, cash apps, ASB/ASM, or places that are liquid but give consistent and save returns.

It never hurts to have more emergency savings, so consider topping it up rather than spending all of your angpao money.

ii) Do you have any debts? (Especially Credit Card debts)

This is definitely not the most exciting way to utilize your angpao money, but it must be prioritized nonetheless.

Interest rates from CCs and Buy Now Pay Later (BNPL) options quickly add up, so use your extra money as an opportunity to pay less in interest and give yourself a peace of mind.

iii) Are you sufficiently invested?

The term “sufficiently invested” can be used loosely here - it just means that you should consider saving this money for your future by practicing delayed gratification.

• Voluntarily contribute some of it to EPF or PRS, since both avenues give you juicy tax reliefs that will reduce how much you pay in taxes.

• Top up your investments based on what your portfolio requires.

• Convert your extra ringgit to stronger foreign currencies to diversify your assets.

There are certainly many other ways to use your angpao money, such as getting an insurance plan if you’re not insured yet.

Regardless, the key is to be mindful of your spending, especially when it comes to extra money. Try not to inflate your lifestyle too much, or you’ll end up spending more even as your earnings increase.

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That’s all for this week’s newsletter! Happy Chinese New Year everyone! 🧧🐉

DISCLAIMER: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.