A recent DBS Group (SGX: D05) study suggested that you need at least S$550,000 by 65 to retire. 

That reminds me of a story … 

I was once asked to address a group of young people about investing today for a better tomorrow. Alas, I might just as well have stayed at home and shown my dog, Sadie, my latest card trick.

The somewhat muted reception I received, whilst disappointing, was not entirely unexpected. 

The thing is, some things in life never change. 

I remember the time when I, too, was young and full of beans. Yes, I can.

At that age, you can’t help but think that the future is something that other people need to worry about. After all, when youth is on your side, there is far too much to live for today without fretting unduly about what is likely to happen tomorrow.

Your tomorrow starts today

Planning for a better tomorrow should always start today because the future is always beginning now.

The DBS study said that Gen Z and Millenials, aged between 25 and 44, invested the smallest proportion compared to their older counterparts. The survey was carried out amongst a group of workers who were aged between 25 and 64.

Investing when you are young is vital. 

But just because you are 65 doesn’t mean that you don’t need to invest anymore.

If anything, you have even more reasons to put your money to work. 

That is because, by the time you are 65, your regular source of employment income is likely to taper off or, in some instances, cease altogether. However, even though your income source has come to an end, it does not mean that your source of income has to dry up too.

Your first objective, though, should be to protect what you have amassed over the years from the effects of inflation. 

And if you do things right, your nest-egg could generate additional income for you.

A good yardstick

What is important is to not end up being poorer in real terms. 

That means putting your money to work in inflation-beating assets.

A useful benchmark for your investments might be a tracker that mimics the Straits Times Index (SGX: ^STI). An example could be the SPDR Straits Times Index Exchange Traded Fund (SGX: ES3). 

Through the fund, you effectively hold a large number of stocks, which helps to reduce company-specific risk.

But here is why it can be a really good yardstick.

Since the fund’s inception in 2002, its performance has been respectable. 

A $10,000 lump sum invested 22 years ago would be worth around $46,300 today. In other words, it has returned a little over 7% inclusive of dividends, which is better than the rate of inflation.

Whilst an index tracker has the obvious advantage of diversification by spreading risk across geographic regions, currencies and different sectors, it could also lower the potential yield you could achieve. 

The current yield for the SPDR STI ETF is around 4.5%.

Get Smart: Don’t do nothing

If you, instead, focus on a smaller universe of stocks, you could do better. 

What’s more, you could choose for yourself whether to target growth or income.

For instance, the average dividend yield for DBS over the past decade has been above 4%, including staying above 5%, for the most part since the start of 2024.

What’s more, its dividends have increased by over 63% since 2022.  

Singapore’s other banks, namely, Oversea-Chinese Banking Corporation (SGX: O39) and United Overseas Bank (SGX: U11), have performed similarly.

That’s in the past. 

My eyes are on future trends as well. 

Soon, we’ll be sharing more about three portfolios I run, namely Kuo’s Income Portfolio, the Malaysian Money Machine and the Asian Consumer Portfolio.  

The upshot is that doing nothing is not an option. 

At the very least you should be aiming to ensure that your money keeps pace with inflation. That goes for whether you are young and ambitious, older and retired or somewhere in between.

The important thing to remember is that the first dollar that you invest in shares can sometimes be the hardest. But it could also be the most rewarding because it will be spending the longest time in the market,  compounding those vital returns for you.

So don’t delay. Get started today.

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Disclosure: David Kuo owns shares of DBS, OCBC and UOB.