Disclaimer: This post is sponsored by Syfe. You can check them out here, or download the app here. All views expressed in this article are the independent opinion of The Woke Salaryman based on our research.
As a young adult, I’ve always felt that the world was conspiring against me.
For one, I had to compete with expats at the workplace in my own country. Housing also seemed pretty expensive. News about the elderly not having enough funds for retirement further exacerbated my fears.
If I had bothered to take the time to learn about the world around me, I’d have learnt that many of these were the result of global trends.
Some of them set in motion long before I was even born.
NGL, without knowing why things happen, it can feel like very little is within your control. Kinda like swimming against the current and wondering why you’re not getting anywhere. I speak from personal experience.
From there, it’s a slippery slope to crippling learned helplessness – thinking that you have no hope of making your life any better.
Look, this is not to say that understanding trends will magically turn your fortunes around. However, having a basic understanding of where things are headed will help you heaps when you need to navigate life.
To paraphrase Sun Tzu a little: If you know the megatrends and know yourself, you need not fear the result of a hundred battles.
Here’s what you need to know to make trends your friend, and not enemies to be feared.
Blockchain, cryptocurrencies and decentralised finance
Before we proceed, I feel like some explanation is needed here:
- Cryptocurrencies: A new kind of digital money/asset, which uses cryptography
- Bitcoin: The most popular cryptocurrency
- Blockchain: A new way of public data storage that makes cryptocurrencies possible
- Decentralised finance (DeFi): The movement to create new financial products on the blockchain
Blockchain technology was first created – in an attempt to rewrite the rules of finance and take (some) power away from the current financial players: big banks, governments, brokerages and exchanges.
Here’s some context: The deep distrust for the traditional financial system arguably first started during the Dot Com bubble in 2001. When the market crashed, retail investors were hit the hardest, whereas smart money was just exciting. It seemed like financial professionals knew something the average person didn’t.
In 2008, during the Global Financial Crisis, retail investors were burnt once again, whilst big financial institutions in the US were given a bailout and got away relatively scot-free.
In response, Satoshi Nakomoto released the Bitcoin whitepaper and introduced the world to blockchain technology. Since then, thousands and thousands of cryptocurrencies have appeared, with a multitude of use cases with vastly different theoretical uses.
For the non-investor:
Even if you don’t want to invest in crypto, you should pay particular attention to blockchain, because it has many uses outside of cryptocurrency, with the potential to disrupt multiple industries from healthcare to logistics or even education.
How I’m preparing for this: Up till now, I’ve invested 5% of my portfolio in cryptocurrencies. I take a buy-and-hold approach on the coins with the largest market cap with a horizon of at least 10 years.
When I cross $1,000,000 net worth, I intend to increase my exposure to 10%.
For further reading, research on:
- ARK Next Generation Internet ETF (ARKW)
- First Trust NASDAQ Cybersecurity ETF (CIBR)
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We will say this first: this whole space is still in its infancy, and despite what the crypto bros will have you believe, there are immense risks involved in investing in cryptocurrency.
While many of the projects show great potential, there’s also lots of hype involved, with not alot of real-world use cases. Not yet at least.
At the moment, blockchain technology will likely have a large role to play in the future. However, the role and value of specific cryptocurrencies are still largely speculative.
This might sound like I’m deriding crypto, but if you think about it, that makes sense: as the crypto-enthusiasts say: early is the new alpha.
By buying into projects before they have any mainstream adoption, you’ll get the potential to grow your money at rates unseen in the traditional financial markets.
The rise of cryptocurrencies is also resulting in massive crypto-hacks and scams.
As businesses start to test the waters with crypto, they may also start investing in better cybersecurity – an industry that may flourish further if cryptocurrency gets more mainstream.
PS: Even if you are a disbeliever in cryptocurrencies, it doesn’t hurt to hold a small amount to hedge against the possibility that you are wrong.
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The China growth story
We’ve talked about why having a diverse portfolio and the upsides of investing in different markets such as China in our article with Syfe previously.
And even though we’ve seen a recent stock market crackdown in China since the time we’ve written that piece, there’s no denying the rise of the world’s second largest superpower.
China’s economy is also transitioning from one focused on manufacturing and exports to one driven by consumption.
China’s rising middle class (which is larger than the total US population btw) is a big driver of economic growth. And with increased purchasing power, we see homegrown Chinese brands score billion-dollar valuations.
Despite the myriad of risks including accounting standards and strict government regulation, China’s vast population and immense (albeit slowing) growth makes it worth a second look for braver investors.
For the non-investor:
As it turns out, my mom was right when she said that if I mastered Mandarin, I’d have improved plenty of career opportunities. (Unfortunately, I did not.)
China’s flexing of soft power has seen many of its companies expand aggressively abroad (Singapore included).
Finally, if you have the ability to speak both Mandarin and English competently, you stand a decent chance of being hired overseas as an expat.
Whereas in the past Singaporeans would shun China as a place to further their career, it’s starting to be glamorous to work in Tier 1 cities such as Shanghai or Shenzhen.
How I’m preparing for this: I invest 20% of my stock portfolio into China stocks. My portfolio includes e-commerce companies such as Alibaba, and JD, all of which have the potential to grow together with China’s rapidly expanding middle class.
For further reading, research on:
- Global X MSCI China Consumer Discretionary ETF (CHIQ)
- iShares MSCI China A ETF (CNYA)
Ageing population and low birth rates
All around the world, people are living longer. Think Japan. But now also China, Europe and much of the developed world.
Singapore is included; UN predicts that almost half of our population will be aged 65 and over by 2050.
The possible implication here is that more money will be poured into healthcare. Or at least more than it already is.
As healthcare advances and people live longer, more efforts are being made to stave off or cure previously untreatable diseases too. For example, gene therapy is now being used to treat inherited blindness.
Another implication comes from the loss of labour. Humans are attempting to use robots to replace humans that are too old.
For the non-investor:
Firstly, you’ll need to factor in a longer living time for you and your parents (if you’re planning for them). This will mean you’ll need more money, especially if you’re after a dream retirement.
Secondly, an ageing population also means a shrinking workforce. In Singapore’s case, there might be two implications: younger folk might pay more taxes as the number of working people decrease.
Thirdly, Singapore might try to offset this through immigration, but this will only mean increased competition for the people still in the workforce (more on that later).
Fourth — while robots, automation and AI are beneficial for business owners and management, they are typically quite harsh to rank and file employees. Read about this here.
How I’m preparing for this: I own individual stocks of a local private healthcare provider in Singapore + a healthcare REIT. However, admittedly this is a more traditional play.
But with advances made in technologies, there’s an argument for exploring the more ‘innovative side of things’: transformative healthcare in AI, genomics and biotech.
For further reading, research on:
- Health Care Select Sector SPDR® Fund (XLV)
- iShares Biotechnology ETF (IBB)
Rapid urbanisation and competition amongst cities
In 1960, 66% of the world lived in rural areas. Today, that figure is close to 44%.
Admittedly, you will not feel this trend much as a Singaporean. Not yet, at least.
However, this also has the potential to affect your life. You see, cities all around the world will compete with each other for the best talent by offering the highest quality of life.
As this article points out, cities can compete on a multitude of factors, including:
- Safety and stability
- Affordability/Taxes
- Culture and arts
- Connectivity and Technology
- Jobs and opportunities
- Sustainability
This is why everyone’s so hyped up on the smart city thing: 5G, driverless vehicles, drone delivery, green energy, big data, water, waste disposal – the list goes on. There are dozens of companies that use tech to improve the lives of urban dwellers.
But of course, a liveable city is not just about technology, but also arts and culture. Both of which require creativity.
(This is one of the reasons why London, despite having a 131-year-old subway system, is often perceived as more desirable than Singapore to live in.)
As one of many thousands of cities, Singapore has done well for itself so far, but competition will always be there.
In the past, it was Hong Kong. In the future, who knows? Tijuana?
For the non-investor:
Here’s the bad news: Remember when we said that cities will compete for the best talent?
People don’t realise that when the talent comes here, they will have to compete with the talent. City-dwellers – especially in highly sought-after ones, will have no choice but to find a way to compete with the world’s best 1%, or even 5%.
In addition, the deadly mix of high demand and limited space will mean that property prices could increase in cities to a level that’s beyond reach for the median income earner (check out page 15).
In the future, investors and landlords could own much of the world’s premium real estate, making homeowners a rarity.
(In Singapore, HDBs keeps housing affordable through subsidies, which makes it somewhat of an exception).
How I’m preparing for this: Apart from purchasing an investment property and REITs, I’m also invested in some smaller trends that are integral to urban living:
- Electric vehicles
- E-commerce
- Software and data companies
For further reading, research on:
- Global X Lithium & Battery Tech ETF (LIT)
- iShares Global Infrastructure ETF (IGF)
- iShares Global Clean Energy ETF (ICLN)
Read this before you jump the gun
Before you all-in your money in one of the trends above, it’s important to know the risks of investing purely in one of these trends.
Things to consider include:
Trends can be slow: Some trends can take place over years, over even decades. Are you able to lock large sums of your money for that long?
Trends can change: In the 1980s, Japan was today’s equivalent of China before having its stock market and economy stagnate for decades.
Company matters more than the trend: Example: Clean water might become a precious resource in the future, but it doesn’t mean a company involved with producing clean water will be stonks. Hyflux comes to mind. Or Yahoo. Or AOL.
Thematic funds ETFs (including the ones that Syfe has) have more risks compared to regular ETFs: Investing in ETFs which are themed after stuff like ‘sustainability’, ‘innovation’, or even ‘China’ can give higher returns, at the cost of higher risks.
A study showed that over a 15-year period, most thematic funds either closed, or underperformed the market. (However, over a five-year period, the results favored the thematic funds).
So, how would we do it?
Well, we’re boring people.
Overall, our strategy still involves a passive globally diversified portfolio. This would form the core foundation of our investments.
This type of investment has almost negligible risks of going to zero, and has been time-tested across decades.
Anything else – including investing in trends, would be different ‘plays’ we make in hopes of beating the market. These are known as ‘satellite’ investments. Syfe recommends investing not more than 30% of your portfolio in them. Our (TWS) comfort level is between 10-20%.
We are aware that this is a pretty unsexy way of investing – there’ll be plenty of people who like to quote Warren Buffet out of context to say: “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”
Our take? Two things.
The first: If you look at Berkshire Hathaway, you can see that it has many holdings. So even Buffet diversifies a little.
The second has to do with the term ‘ignorance.’
While many might view the term negatively, we prefer to see it neutrally.
There are numerous things we do not know about the future. And we try very hard not to be arrogant to assume that we know everything.
After all, it’s important to recognise that all of us are at least a bit ignorant. This is far better than the alternative: Hubris and overconfidence.
When it comes to life – and especially the markets – pride always comes before a fall.
Stay woke, salaryman.
If you’re looking to invest in these trends, consider Syfe Select
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These ETFs have been selected by Syfe’s investment team based on factors like low fees, high liquidity, and good track record. Their ETFs include:
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- ESG ETFs focusing on clean energy (ICLN), water resources (PHO), solar (TAN) and more
- Factor ETFs such as value (VTV), growth (VBK), momentum (MTUM), small-cap (SLYV)
- ARK Funds: ARKK, ARKQ, ARKF, ARKG, ARKW, ARKX. (if you’ve heard your investment bro friends talk about Cathie Wood, they’re talking about ARK Funds)
- Regional ETFs: Europe (IEUR), China (MCHI), India (INDA), South Korea (EWY) and more
- Of course, you can also go plain vanilla with ETFs like Vanguard Total Stock Market (VTI) or iShares S&P500 UCITs (CSPX) to build a core portfolio, which is what we’d start with
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Check out SYFE Select here.
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This article is sponsored by Syfe but the views expressed here are entirely our own. This post is only for information and not financial advice. This advertisement has not been reviewed by the Monetary Authority of Singapore.
