BT Money Hacks: The ultimate guide to personal finance
IN TODAY’S fast-paced and financially driven world, managing personal finance can be daunting. However, understanding key financial principles can make this journey smoother. The Business Times’ latest episode of Money Hacks, hosted by Howie Lim, features insightful tips from Steve Foerster, a finance professor at Ivey Business School. Author of “Trailblazers, Heroes, and Crooks: Stories to Make You a Smarter Investor”, he sheds light on the three pivotal levers of financial success and emphasises the importance of a sound investment philosophy.
Financial levers unpacked
The more you save, the better positioned you’ll be in achieving your financial goals. This requires striking a balance between current consumption and future financial security - deciding to spend less today and invest those savings can significantly impact your retirement or major life purchases.
Steve suggests that the best time to start investing was yesterday, and the second-best time is today. The longer you save and invest, the greater your potential returns. This lever emphasizes the importance of starting early and being consistent in investing. “Having a longer runway allows your investments to grow through the power of compounding,” he explains.
Understanding risk vs reward investing
The goal is to achieve the highest return for a given level of risk. According to Steve, “The more you save and invest, the less risk you have to take to reach your financial goals”. Understanding the trade-offs between risk and return is crucial for making informed investment decisions.
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Steve also discusses the emotional and psychological factors that can hinder investment success. Overconfidence, fear of missing out (FoMO), and emotional decision-making can lead to poor investment choices. For instance, he narrates the cautionary tale of Sir Isaac Newton, who lost a fortune in the South Sea Bubble of 1720 due to emotional investing. He underscores the importance of overcoming these biases to make rational investment decisions.
The importance of being philosophical
A foundational theme of the discussion is the importance of a sound investment philosophy. Whether you believe you can outperform the market, or you adopt a more passive investment strategy, having a well-thought-out, evidence-based approach is crucial. Steve’s book, “Trailblazers, Heroes, and Crooks,” provides numerous stories that illustrate the long-term benefits of such a philosophy.
Listen now for details of the three levers of financial success. Remember, it’s never too late to start investing and taking control of your financial future.
For more tips and expert advice, tune into Money Hacks by The Business Times. The Money Hacks podcast offers reliable and engaging conversations with expert insights, actionable advice, and a focus on current events. Each episode is designed to help you navigate your financial journey. Tune in, stay informed, and get ahead financially with Money Hacks.
For more episodes, go to bt.sg/moneyhacks and if you have feedback or an episode idea, please get in touch at btpodcasts@sph.com.sg.
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Written and hosted by: Howie Lim (howielim@sph.com.sg)
With Steve Foerster, professor of finance, Ivey Business School, Canada
Edited by: Howie Lim & Claressa Monteiro
Produced by: Howie Lim
Engineered by: Chai Pei Chieh
A podcast by BT Podcasts, The Business Times, SPH Media
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