Having lived in Brazil where annual inflation rates went through the roof, reaching 450 per cent in the 1980s, Mrs Alania Hsu Concepcion knows better than to leave out the impact of inflation when calculating the returns on her investments.
'Living in Latin America gave me a new appreciation of the concept of inflation and how most investors don't really consider how much of a threat it can be,' she noted.
'Inflation has the power to wipe out decent nominal returns and leave very little real return or future purchasing power. In Brazil, you don't look at any rate of return without accounting for inflation.'
As a result, Mrs Concepcion, 33, factors a 5 per cent to 6 per cent inflation rate into her personal investment assumptions.
An American who has been a Singapore permanent resident since 2004, she joined Barclays Bank in December last year as an associate director at its investor solutions desk.
In the past five years, she has lived in Sao Paulo, Beijing and Singapore.
She started actively investing about seven years ago. Although she has a private banker who helps her manage her finances, she calls the shots as to what to invest in.
After all, she works in the financial markets, which keeps her on top of what's going on.
She holds an MBA from the University of Sao Paulo and is also a certified financial analyst.
She is married to Mr Cesar Concepcion, 43, a country manager in China for pharmaceutical firm Novartis Oncology. They have a two-year-old daughter, Mia.
Before joining Barclays, Mrs Concepcion worked in Merrill Lynch, Credit Suisse and ABN Amro Bank.
Q: What are your money habits?
I have no debt besides mortgages, and I manage my savings and investments wisely. I am neither frugal nor lavish. I live comfortably but not excessively.
Most of the time, I buy the things I do because I like them or I need them. It's not a matter of how expensive or inexpensive they are.
I contribute whenever I can to my family and to people who need it, old and young, and organisations serving good causes.
Q: What financial planning have you done for yourself?
Besides property, I have a few investment accounts, consisting mainly of mutual funds, stocks and bonds, commodities and some cash instruments.
I have a Central Provident Fund (CPF) account in Singapore that I'm planning to do more with through the CPF Investment Scheme.
My husband has a 401k plan - an employer-sponsored retirement plan common in the United States - and contributes to social security there.
We aim for a total return on our investments of 10 per cent to 12 per cent a year, and so far, we have exceeded these targets almost every year because of the diversification of our total holdings.
I'm also starting to put a portion of my portfolio into commodity funds, especially agricultural ones, to hedge against the increased cost of living as food prices rise around the world.
I think the world is entering a higher inflationary period, and we need to protect the real value of our assets.
I prefer to invest in actual agricultural commodities rather than resource stocks such as oil or gas because they participate fully in the rise in commodity prices, whereas resource stocks are prey to stock- market sentiment and company-specific risks.
I'm also a fan of emerging markets, but with these funds, I think it's especially important to focus on diversification. For instance, I would pick a global emerging markets fund rather than a single play on China. Market timing is also crucial.
We aim to generate a target sum of US$300,000 (S$411,300) through a tax-efficient college savings fund for our two-year-old daughter by the time she turns 18. We contribute on a monthly basis to this fund.
Q: What about insurance planning?
Both my husband and I have life insurance, disability insurance and health insurance through our employers, although, to be honest, it isn't enough. We plan to take out additional life insurance, as well as critical illness insurance.
Now that we have a daughter, I think it's important to be prepared in the event of an unforeseen emergency.
Q: What's your investment philosophy?
Diversify, diversify, diversify. I don't believe in putting all my eggs in one basket.
I believe in buying things when no one else is buying, when a particular market is on the uptrend, and selling once your target return has been achieved.
We buy real estate, so that we will have rental income to supplement our living expenses when we retire.
Rental income does rise with inflation and, therefore, provides a good hedge.
Q: What are your property investments?
My husband and I own a five-bedroom country home that sits on 2ha of land on the eastern seaboard of Virginia in the US, and a two-bedroom colonial beach apartment in Puerto Rico.
We are in the midst of buying a three-bedroom apartment in New York City as an investment property.
Now is a good time to buy US properties, as interest rates are low and mortgage rates are favourable.
I would love to buy something here, but the prices are still too high. I think the market will soften over the next two years, and we hope to get in on the next cycle.
Q: Money-wise, what were your growing-up years like?
My father is a mathematician, and my mother is a linguist who worked for the United Nations and is now with the World Health Organisation. They have four children.
My father used to give me a monthly allowance of about US$25 when I was young. I had to put 20 per cent of that in my bank account.
When I think of how I went to the bank every month at the age of 10 to deposit US$5, I have to laugh, but it was a principle that worked.
I have a brother who is also in the finance sector. These days, he runs his own hedge fund.
I think my family background has made me appreciate the value of a dollar, and has motivated me to invest wisely and plan for the future using both property and the financial markets.
Q: What has been a bad investment?
Keeping all of my investments and properties in US dollars. The greenback has depreciated and lost roughly 30 per cent over the past five years.
Q: Your best investment to date? Hard to say. Our properties have done well. I have a Brazil fund that has given stellar yields of more than 30 per cent annually since 2004.
Commodities have performed superbly over the past few months and should continue to do so.
I also have a few bond funds that have outperformed most of my equity funds, and my inflation-linked securities have outperformed other liquid instruments such as treasury bonds and long- term certificates of deposit.
Q: What's your retirement plan?
Work hard until I'm 50, invest our money wisely in the markets, contribute diligently to our retirement accounts, flip a few properties and pay off our mortgages, and then retire to our homes in the US.
Q: And your home now is...?
A three-bedroom condo in the Holland area.
Q: And your car is...?
I prefer the convenience of a taxi. I don't believe in buying expensive cars as they are depreciating assets.
Buy when market is on the uptrend
I believe in buying things when no one else is buying, when a particular market is on the uptrend, and selling once your target return has been achieved.'
MRS CONCEPCION, on the need to spread out one's investments
Timing is everything when buying property
' I would love to buy something here, but the prices are still too high. I think the market will soften over the next two years, and we hope to get in on the next cycle.'
MRS CONCEPCION, on property purchases
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