Question: "I have just retired. After reading various blogs, books and attending courses, I decided to invest all my money worth $500,000 into the STI ETF. and US$1,000,000 into SPDR® S&P 500® ETF. However, I would like seek your second opinion whether is this an appropriate decision."
Answer: You are trying to get an affirmation that your decision is correct which unfortunately I have to inform you that your decision to invest in these two ETFs is a foolish one.
First, the STI ETF follows a very bad index. The reason is because the FTSE Straits Times index do not appear to cap the holding weightage. As a result, you end up having 40% of the STI ETF invested in just four companies namely SingTel, DBS, UOB and OCBC. Three out of four of these companies are banks!
Second, the SPY ETF is listed in the New York Stock Exchange. It is highly tax inefficient as dividends are taxed at 30%. Moreover, upon your demise, there is a hefty estate duty of a whopping 40% in excess of US$60,000. This means, upon your demise (1000000-60000) * 0.4 = US$376,000 will be paid to the US government! If you are not concerned with estate duty because you have no dependents, why don’t you consider donating your money to those who are in need? Do not be selfish.
Third, putting all your money into equities imply that your risk tolerance is super high. Generally retirees have a lower risk tolerance compared to a young person because you do not have any income to “average down”. It is likely you have invested beyond your risk tolerance.
Fourth, if your risk tolerance is low, you will end up selling your investment when the ETFs drop by XX%. Remember, investors buy high and sell low. This is the rule of the market.
Instead of following advice of unknown persons through blogs (like this one and many others) and seminars, why don’t you start taking up responsible in your own financial planning matters. Making a decision first and then having second thoughts by asking me shows that you are not taking responsibility.
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