Three Principles

Information

Always start early
Retirement planning must start as early as possible. One of the most important concepts in investing is the compound interest. The earlier you start the easier you can accumulate wealth.

For example: Taking an investment instrument with an annualized return of 10%, when 10,000 is invested monthly, will accumulate to 770,000 in 5 years; when invested for 10 years it will become 2.05 million; and extending to 25 years, the accumulated amount will be 13.27 million. From this, it isn’t hard to see the magical effects of time value. Ms. Lee in case 1 didn’t understand this principle. To reach the same investment objective, the later you start means the more you need to invest, and you'll have other burdens as well.

Make regular investments, force yourself to save
Retirement planning can span over a long time; the easiest and lowest risk investment style is choosing a fund with stable returns over the long-run, and investing a set amount regularly. The advantage of regular investment is that you don’t need to worry about investment timing. When you force yourself to investment regularly every month, you will get less fund units when markets are high and more units when markets are low. Therefore, there is no need to worry about investment timing, no need for a large initial investment, and no need to worry about short-term volatility in the market. It is an ideal investment style for retirement planning. Mr. Huang in Case 2 is a perfect example of using this style and reaping huge rewards.

Review periodically, adjust as needed
Mrs. Ting in case 3 started investment early but has lower performance than expected, why?
The reason is that she didn’t set a stop-loss point or a profit limit and didn’t make continued adjustments to her investments according to preset objectives and performance. Investments needs to be monitored, periodic examination of performance and the appropriate selling and stop-loss measures can ensure investment returns are as expected. By going through different stages in life, one’s needs may change; it is essential to adjust the contents of your retirement plan accordingly.

Late Planning
Because the funds required for retirement are often large, starting late means the period for wealth accumulation will be short, and if a high-risk investment instrument is chosen, the retirement fund may be exposed to too much risk. This kind of retirement planning often fails from adverse market performance in the short-term.
Saving Too Little
When saving too little, even when starting early, the compounding effect is not as significant, making it difficult to reach retirement goals.
Over-conservative Investment
Because retirement planning is a long-term investment, if the investment style if overly conservative, the returns may be lower than inflation, meaning there is no effective growth in assets; on the other hand, selecting the right investment instrument can not only offset inflation but also accelerate asset accumulation.
Over-spending early in retirement
Although inflation, longevity, medical expenses are all factors you can’t control, monthly expenses after retirement is something you can. Spending in moderation and with planning will ensure that your retirement funds last longer.