Happy New Year from AQUMON! As they say, there is no better day to ‘seize the day’ than today, so let's get our finances in better order and set ourselves on the right path for financial successes in 2021 -- the best gift for yourself this year. You won’t regret it!

Here are 5 useful pieces of financial and investment advice you need for 2021l:

Advice #1: Assess your personal or household budget.

 

After working and staying at home for extended periods in 2020 due to COVID-19, likely we’ve all spent less on travel, entertainment, and luxury items with more going back into our savings account. That’s a great start! This is the perfect time to assess how much you spent in 2020, where exactly the money went and if there are areas you can improve in.



Paying off your debt specifically is the #1 thing you should do. It is the first step to stop the bleeding: if you are paying 30-40% interest on your outstanding credit card payments, there is very little income or savings solutions to help you build your wealth. So pay off your debt first!

If you are unsure how to start or don’t have a sufficient record of your 2020 spend, don’t worry. Make it a point to start tracking today. There are many apps in Hong Kong like Planto, Gini, and some of the banking apps that help you automatically analyze your bank account and credit card spendings. Knowledge is power!

Once you assess your expenses, you can further categorize your expenses into fixed (such as your rent and utilities) and variable (dining out, entertainment, etc). Figure out what variable expenses you are comfortable cutting back on then calculate out how much you have left to contribute monthly to your savings. It’s important to keep it realistic so you can comfortably stick to your budget.

Advice #2: Build up your emergency fund. 

 

If COVID-19 has taught us anything, it is the critical need to build up an emergency fund since the unexpected can happen overnight. Many people globally in 2020 with both their incomes and the stability of their jobs reduced, started reaching into their savings account to bridge their expenses. 

 

If you experienced this in 2020, creating an emergency fund that equates to 3-6 months of your living expenses should be one of your top financial priorities in 2021. So even if you unfortunately lose your job, you can use this money to pay for your daily expenses while you find a new one.



So how do you get started?

1) Calculate how much you want to save in 2021

 

After assessing your personal/household monthly expenses, start aiming for 3 months worth of savings and turn it uo to 6 months once you feel more comfortable. 

2) Set aside a monthly savings goal

 

Once you create a habit of saving monthly, this will feel easier. Take a step further and start transferring a certain amount monthly from your paycheck directly into a sub saving account designated for your emergency fund. Take the thinking process out!

3)  Make your savings work harder

 

Considering you are receiving close to 0% for the money in your traditional savings account, you can also look into putting this money in highly liquid assets (can quickly convert into cash in case of emergency) like a virtual bank savings account (offering 1% up to HK$500K), money market funds or even shorter term time deposits. You deserve more for your hard earned money!

Advice #3: Set an investment goal. 

 

Much like the approach with our emergency fund, the starting point to reach your investments goals in 2021 comes to first setting a crystal clear goal(s). Also, take a risk assessment test: it is important to know your risk tolerance to help you better align with investments that better match your risk tolerance.  



Here is a simple breakdown in terms of investment goals:

1) Short term goals: This is the focus for your budgeting and emergency fund mentioned earlier.

2) Medium term goals: This may be related to you saving up and investing to accumulate enough money for a vacation or trip (when we finally can travel again post COVID-19) or further out could be a down payment on a new home. Stocks, exchange traded funds, and mutual funds are great investment tools to get started for your medium term goals.

3) Long term goals: This might be retirement-related or even for the education fund for your child. If you are saving and investing for retirement it is important you try to reverse calculate how much your need per month after you stop working. In terms of investments, since you don’t need money immediately you can even consider some less liquid investments like bonds or alternative investments like private equity which offer higher returns due to their reduction in liquidity (called ‘liquidity premium’).

Like your savings make it a point, however small the amount, to periodically contribute towards your investment goal. Beyond helping yourself develop the habit of investing, let time help you compound your returns for additional upside in your investments. Put your investments on auto-pilot!

Advice #4: Look closer at your investment fees. 

 

If there is 1 area investors should be more aware of, it should be how much they are paying for their investment fees. Fees can hugely erode your wealth building efforts and shrink your investments over time, especially if markets take a turn for the worse. There are 3 things you should consider doing:

1) Understand what you are paying in fees

 

For example, for mutual funds, there are commonly subscription fees when you first invest, management fees during your investment period and even fees that you can’t see clearly at fund level. For stocks or exchange traded funds (ETFs), you are charged every time you transact. Look closely at the ‘expense ratio’ or total fees of everything you are invested into. Become a smarter investor!

2) Shift to lower fee investments

 

If the mutual funds or investments you are invested into seem heavy in fees, it may make sense to look at more passively managed exchange traded funds (ETFs). Unless your mutual fund manager can consistently beat the market, taking a more passive approach may end up boosting your investment return in the long run.
 

3) Consider a financial advisor or platform with cheaper fees

 

If you are already investing in low cost investments but still feel the fees are too high, maybe then it is time to consider changing your financial advisor to a more cost effective robo advisor or do it yourself.

Much like how a football game is won with both offense and defense, protecting yourself from fee erosion is the unbeatable defense for your investment portfolio to see success. Score!

Advice #5: Review your investments: 

Investing actually has a lot of similarities to exercising and getting in better shape. The key to reaching any goal is to periodically review what you are doing right and wrong (remember tip #1 with your expenses/budget?). 



When you are starting out, reviewing your investments every 6-12 months is sufficient. The goal is to remind yourself what you are invested in, to figure out what investments are working for you, and what investments no longer match your goals and risk tolerance. As you get more comfortable, you can review your portfolio a little more frequently at 3 months maybe even with the help of a financial advisor or trust friend.

We hope this helped kickstart your finances and investments in 2021! If you have more If you have any questions, please don’t hesitate to reach out to us at AQUMON. We’re always happy to help.

 

 

 

 

About us

As a leading startup in the FinTech space, AQUMON aims to make sophisticated investment advice cost-effective, transparent and accessible to both institutional and retail markets, via the adoptions of scalable technology platforms and automated investment algorithms.

AQUMON’s parent company Magnum Research Limited is licensed with Type 1, 4 and 9 under the Securities and Futures Commission of Hong Kong. In 2017, AQUMON became the first independent Robo Advisor to be accredited by the SFC.

AQUMON’s major investors include the HKUST, Cyberport, Alibaba Entrepreneurs Fund and the Bank of China International's affiliate.

 

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