5 things I wish I know about finance when I'm 20

The recent pandemic has send troves of people into the capital market or gold trading or cryptocurrency or split stock frenzy buying. I definitely feel the motivation to start learning options seriously.

Over the past few weekends, I have generate what I deemed to be a 45% of hitting my financial goals. The idea is to consistently inject money into the market for a targeted returns of 20%. Yes, I know, average annual returns of the market is about 10%. And the bear market could easily wipe out the gains. Or worse, the falling knife of the market that could take years to recover.

Yes, maybe I'm overzealous because of the recent market conditions, in which, I have only gain a few hundreds dollar, since I'm taking baby steps in the market. But indeed, there are times when I'm become overzealous and got burnt by cryptocurrency back in 2019.

Here are 5 things I wished I learn about managing my finances when I'm 20.

5. Managing risk and rewards might outweigh totally avoiding risk

Recently, I have been tuning in to tastytrade videos and picking up tips on how they manage their risk and probability of the trade. I haven't try them out myself but am planning to start on paper trading next month on options.

One of the conversation goes along the line of understanding the balance between taking risks to achieve a potential outcome, for example borrowing money for mortgage, in hope for property appreciation or buying shares. Strictly speaking, keeping cash on its own is a 100% probability of a 2-3% inflation.

4. Cashback

I love cashback. And it is not until I have my first credit card at the late age of 27 before I fully immerse myself in the world of cashback. Being poor is expensive. Being of a middle income enables one to sign up to credit cards, that one could be rewarded with cash, and many other cash back and rewards potential.

Also, most high interest savings account could earn higher interest through the bank's credit card. When your salary does not meet the minimum requirement for the credit card, that's proabbly a good $60-$80 loss, which could become $720 a year. Since you are going to spend that money anyway, why not get some benefits out of it.

3. Credit scores

Besides the cashback, having a good record of credit will allow easier qualification of bank loan, such as a home loan, car loan or education loan. If you are going into a career in finance, establishing a good credit score is essential.

2. Passive income

Admittedly, passive income has been a concept that most people heard of it since young. I have also contemplated and tried dabbling into the realm of passive income. I tried blogging, writing on other platforms but it never amount to anything substantial.

One of my ex-boss tells me to earn a lot of money, you need to provide tremendous value or impact a lot of people. Provide value, devise a methodology for potential monetization and money will follow. Or the interest rates that you are earning in your CPF account, yup, you will be grateful for a no-risk interest attached to the account.

1. Dividend yield

I love my dividends. Every time I receive it, it feels like free money for me. Even though STI-ETF has been disappointingly falling flat. Dollar cost averaging has made me feel a bit better, but overall the ETF has severely lagged behind the international counterparts and robo-advisors. Speaking of which, I used StashAway. (and yes, that's a referral link that will get both of us up to $10,000 SGD managed for free for 6 months). Looking through the statement of StashAway, the dividends are reinvested in,and with the portfolio mainly in overseas market, it is currently outperforming my STI-ETF.

I have a late start in life. If I have known this 5 things when I was younger, life might have taken a drastically different path. This year, I'm only 30, there still a good number of years of runway ahead. What are the things you wish you know about finance when you are younger? Share your thoughts with me.

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