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Sunday, July 30, 2017

Don’t bank on betting to grow your nest egg

Avoid gambling away your future


For more than two decades, a woman here has bought Singapore Sweep tickets every month and says she’ll retire as soon as she wins enough. She’s still working. Others gamble on 4D or Toto in hopes of improving their finances. There are also those who gamble for fun, to socialise, or just to pass the time. Whatever the reason, gambling can be a costly past-time, and spending less on it can lead to a better financial future.


There are indeed many people here who wager regularly, and gambling is clearly not going to stop anytime soon. Some 44 per cent of Singapore resident adults admitted that they gambled in the last 12 months, according to the latest Survey on Participation in Gambling Activities by the National Council on Problem Gambling (NCPG) in 2014. 4D, Toto, Singapore Sweep and social gambling are most popular, according to the NCPG. The online gambling that became legal last year will make wagering even easier and could increase the numbers further. The Government’s tightening of regulations on jackpot machines in the past week may be indicative of a widespread problem.

Most of these gamblers are hoping to win big, whether it’s striking the jackpot, winning thousands of dollars in 4D or more than S$10 million in the Toto Hongbao. In reality, most gamblers actually lose, regardless of what they say. With odds of winning substantial amounts ranging from about one in 10,000 for the top prize in 4D to about one in 3 million for the monthly Singapore Sweep, most people end up losing far more than they win.

And while gamblers in the NCPG survey said they spent just S$20 per week on their habit, other data indicates that gamblers may actually spend more. The annual report of the Singapore Totalisator Board (Tote Board) – which operates 4D, Toto, Singapore Sweep and sports betting – shows that it reeled in S$7.01 billion in revenue in 2016, which is about S$1,250 for every Singaporean and permanent resident. Since less than half of adults here say they gamble and nearly a million people are too young to gamble legally, the actual amount a gambler spends legally averages out to a little more than S$3,500 per year.

The Tote Board also says that it only paid out S$4.48 billion in prizes, meaning that just 63 per cent of the money went back to the gamblers. While research by H2 Gambling Capital cited in The Economist magazine indicates that the average Singapore resident lost about S$700 on gambling last year, the second highest amount in the world after Australia, the Tote Board numbers indicate that average losses could be more than S$1,250.

By the time they reach their early 60s, average gamblers who lost S$1,250 per year would lose more than S$50,000. Moreover, they would also lose out on investment income from those funds. By investing just half of the amount they lost instead of frittering it away, gamblers could end up with a substantial nest egg and still be able to spend something on their wagers.

If the average gambler cuts back and halves his or her wagers and saves S$50 a month instead of losing it, then invests it to earn a 5 per cent return, the total savings accumulated would be about S$76,000 by the time he or she reaches the age of 60. Gamblers who wager more and save half of a larger amount could end up with an even larger sum.

While S$76,000 isn’t enough to fund retirement entirely, it could make a tremendous difference. An average 65-year-old could increase his or her retirement income by about S$300 per month for the rest of his or her life, even without earning any investment returns. With recent surveys consistently showing that a majority of Singaporeans are worried about not having enough money for their retirement, this extra sum could help alleviate some of those concerns.


Given the likelihood of their losing money, gamblers would clearly be far better off if they stopped gambling entirely. Realistically, however, gamblers are unlikely to stop. What they can more easily look at, then, is how to cut back.

On days when they receive their salary or when nearing the closing date for 4D bets, for example, gamblers can change their routine so that they don’t pass as close to the Singapore Pools outlets or they can socialise with friends and family until after the closing time. Meeting friends for a social gathering at the local coffee shop instead of the club where jackpot machines are located may also help. Experts also suggest that those with gambling problems get involved in activities that they’ve enjoyed in the past and may have given up due to gambling. They can also set a lower cap on their regular gambling amount, or gamble together with friends or family who can help them avoid overspending.

Tracking how much they spend on gambling and how much they win or lose can help, since gamblers will see how expensive a hobby it can be when they track their losses. They should also ignore promotions for “responsible gambling”, since the messages can make gambling seem normal rather than helping to reduce the amount they actually spend.

While problem gamblers and the increasing number of gambling addicts may need special services from the National Addictions Management Service or other centres, the average gambler can do a lot to reduce his or her spending and ensure a more comfortable future.


While gambling may seem like fun, the Singapore Sweep and other games actually squander more money than many people realise rather than helping them with retirement. Even if you don’t want to stop gambling, changing habits and wagering less can bring tremendous benefits that ensure a far better financial future.


Saturday, July 15, 2017

‘Rojak Portfolios’ and ‘poor millionaires’

By: Eric Kong

What do you call a mish-mash of investment products haphazardly acquired throughout an investor’s lifetime, with an overall portfolio return of 0.5% and which the investor can’t even bear to look at? It is called a “Rojak Portfolio”. It happens to most investors.

As an example, see the table below: The “Rojak Portfolio” totals $800,000 and gives an overall return of 0.5% per annum. It is a mixture of blown-up, best-forgotten investments and some cash and blue-chip stocks.

Eight hundred thousand dollars growing at an overall portfolio return of 0.5% for 15 years will amount to $862,146. Hardly substantial. But if one were to invest the same amount in the Singapore stock market exchange traded fund at an 8% rate of return per year, it will result in $2,537,735. That is a tripling of the original amount!

Hence, clean up your “Rojak Portfolio” and make allocations to where it matters most. One may argue that one is happy with $800,000 as a retirement portfolio. That amount is no small potatoes, but we need to do more because times are different today. For example, in 1970, a millionaire was a “real millionaire”. He could buy 50 units of HDB flats at $20,000 each with that amount of money. I call today’s millionaires “poor millionaires”. They worry a lot about their future and their children’s future because they know that a million dollars today can’t do very much.

For example, when you retire and put that entire million into 30-year SGS bonds that pay 2.75% a year, you will get $2,291 in interest income per month. That can pay for the daily papers, kopi and kaya toast and perhaps a yearly trip on a budget airline — hardly a millionaire’s lifestyle. With the ravages of inflation, in 2050, $2,291 will be worth just $863 in today’s money. You might have to be satisfied with just black kopi without the kaya toast in 2050.

The ‘poor millionaire’ really cannot afford a ‘Rojak Portfolio’
I have come across many “Rojak Portfolios” and one thing I notice is that they all have too much cash. This ties in with surveys that show Singaporeans hold between 20% and 50% of their portfolio in cash.

Putting 50% of your portfolio in cash means that only half your assets are being put to good use. If you hold a lot of cash, you will bring down the overall portfolio return. Fixed deposits pay 1% and high-quality bonds pay 3%. The returns are too low to make any difference.

Risky bonds and perpetuals may pay more, but they are not worth the risk for the returns. Furthermore, their returns are still inferior to ETFs, which have a long term rate of return of 7% to 8%. If you want more returns, then arm yourself with knowledge of value investing in stocks. That can bring your returns to 10% per year if you are diligent.

So, why do people hold so much cash? For safety, I suppose. But it doesn’t make sense if one does not need the cash in the short term. Cash earns nothing and after inflation, it is negative. If you have a steady job and your income exceeds your expenses, there is no reason to hold cash because you have a surplus. Invest that cash pile and the surplus!

Some might say “cash is king”. They think they can load up the truck when the stock market crashes. The idea is good, but is rarely implemented. When stock markets crashed in 1997 and 2007, people just panicked and sold their shares, or just did nothing. The “poor millionaire” really cannot afford to hold too much cash.

The writer is fund manager and director of Aggregate Asset Management (AAM) Pte Ltd ( AAM is a no-management-fee value manager that serves high net worth individuals.