Month: August 2025
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What is risk?
Volatility is risk The risk of an investment is measured by its volatility. This is an investment’s Sharpe Ratio. In short, it is how much return you get per unit of volatility. Cash has the lowest volatility, which is to say, none. Bonds have “medium” volatility. Stocks have “high” volatility. Hence, cash is considered the…
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You are a bond
Every month, you generate interest. This is your income. In that sense, you are like a bond. This is your human capital. The difference between Financial and Human Capital We have some amount of money saved, hopefully. This is your financial capital. When we are young, we have less money but more years of income…
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Financial Fragility
What I do: I save 6 months of expenses One in four Canadians are unable to cover an unexpected expense of $500. 59% of Americans cannot cover an unexpected expense of $1,000. One in two Singaporeans has saved less than 6 months of income. Source: OCBC 2024 Financial Wellness Index Financial fragility is the inability…
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The Long Term
What I believe: the Long Term is longer than any of us expect. I think I will live to 100, but even that may be too short. And if it’s too long, it won’t matter to me anyway. …Most investors believe three or even five years is a long time, and 10 years is an…
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How to invest in bonds
What I do: I don’t invest in bonds Bonds are like a loan to a company or government. Every year, the company pays interest to you (the coupon), and at the end of the loan period (the maturity), you get your original loan amount back (the principal). Bonds are considered stabler and lower volatility than…