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My friend's windfall...how to invest it.

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  1. #1

    Join Date
    Jul 2011
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    My friend's windfall...how to invest it.

    My friend just got news of HK$500K into her HSBC account. She asks me how to invest this cash. She will retire from her HK employer soon and has a fully paid flat in MaOnShan. She has been invited to consult with an HSBC money manager and i won't be there to listen.

    Seems no bank here will offer more than 1% on savings (some offer only 0.0%), and i do not know if bank accounts in HK have any govt guarantee against bank loss, as found in USA. Premium accounts here may offer better rates. She certainly does not need much risk but even at 1% return she will be losing money to inflation every year.

    I looked at Vanguard USA ETFs and found only one on offer, S&P 500 Index, which is creeping around 3% past year, up and down. And fees are low. But where to purchase this fund in HK is my question. Will HSBC brokerage offer this to her and can she buy this ETF thru that bank?
    She also has a BOOM brokerage account.

    The USA market looks the best to me, i cannot advise investing any money in china, even if the past returns are high.

    Any comments and ideas welcome. Thanks.


  2. #2

    I would go for a fund that tracks the global stock market rather than just the US market. (US makes up 55% of the global market anyway, but the other 45% contains Europe, Korea, Japan, China etc which I see no reason to exclude).

    As per above reply, 100% equities, even globally diversified, is still quite a risky allocation. Maybe look at CDs/Bonds or Cash for a large part of it.


  3. #3

    Join Date
    Mar 2010
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    No rush to invest immediately. Can easily get 2% interest on HKD fixed deposit for 1 year.


  4. #4

    A qualified professional financial adviser would want to know more about your friend's circumstances, risk tolerance, short and long term needs before offering any advice.

    Since I am neither qualified nor professional when it comes to investing, I can offer the following:

    1. since this is a windfall (by definition unexpected) and she is about to retire, I'm assuming she does not need the money to support her retirement so however she invests the money it's an add on rather than something she is/was relying on to support her retirement. I'm also assuming she has enough cash/deposits to cover emergencies

    2. she is still working. If she has not already done so she should look at taking advantage of the tax deduction for voluntary contributions to her MPF fund. There are other threads on this but IIRC the conclusion was that those within a few years of retirement would gain more from the tax saving than they would lose in the higher MPF fees. Obviously, her final year marginal tax rate will be a relevant consideration as will her age

    3. she's seeing a bank "money manager" which carries the risk that the bank will try to sell her expensive products such as actively managed funds with front end sales commissions, annuities and insurance linked products. These should be avoided

    4. in terms of what to invest in, I'd start by looking at what investments she already has and either adding to them if she is already well diversified and comfortable with them and/or looking to create some further diversification if she is not. A low cost bond or equity index fund tracking major indices (such as the S&P500 or MSCI World Index) or a mix of the two may be suitable depending on her risk tolerance and other investments

    5. HK has a deposit protect scheme which covers up to HK$500K per customer per bank subject to some exclusions which are listed here: https://www.dps.org.hk/en/coverage.html


  5. #5
    Quote Originally Posted by DarrenChan:
    No rush to invest immediately. Can easily get 2% interest on HKD fixed deposit for 1 year.
    +2 Taking her time to consider all the options is sensible. The only thing that might have a degree of urgency to it is in working out whether she can take advantage of the MPF voluntary contribution before she retires - but that's only HK$60K IIRC.

  6. #6
    Original Post Deleted
    That's a pain but worth it - HSBC's online rate for HK$500K for 6 months is a whopping 0.38% pa.

  7. #7

    Join Date
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    Quote Originally Posted by traineeinvestor:
    That's a pain but worth it - HSBC's online rate for HK$500K for 6 months is a whopping 0.38% pa.
    Do HSBC offer any better by visiting the branch?

  8. #8

    Join Date
    Sep 2015
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    463
    Quote Originally Posted by traineeinvestor:
    A qualified professional financial adviser would want to know more about your friend's circumstances, risk tolerance, short and long term needs before offering any advice.

    Since I am neither qualified nor professional when it comes to investing, I can offer the following:

    1. since this is a windfall (by definition unexpected) and she is about to retire, I'm assuming she does not need the money to support her retirement so however she invests the money it's an add on rather than something she is/was relying on to support her retirement. I'm also assuming she has enough cash/deposits to cover emergencies

    2. she is still working. If she has not already done so she should look at taking advantage of the tax deduction for voluntary contributions to her MPF fund. There are other threads on this but IIRC the conclusion was that those within a few years of retirement would gain more from the tax saving than they would lose in the higher MPF fees. Obviously, her final year marginal tax rate will be a relevant consideration as will her age

    3. she's seeing a bank "money manager" which carries the risk that the bank will try to sell her expensive products such as actively managed funds with front end sales commissions, annuities and insurance linked products. These should be avoided

    4. in terms of what to invest in, I'd start by looking at what investments she already has and either adding to them if she is already well diversified and comfortable with them and/or looking to create some further diversification if she is not. A low cost bond or equity index fund tracking major indices (such as the S&P500 or MSCI World Index) or a mix of the two may be suitable depending on her risk tolerance and other investments

    5. HK has a deposit protect scheme which covers up to HK$500K per customer per bank subject to some exclusions which are listed here: https://www.dps.org.hk/en/coverage.html
    As always your posts are always very organised, clear and with helpful and accurate information, just the way your really well written blog is.

  9. #9

    Join Date
    Jan 2014
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    1,266

    I think at most only 10% of the windfall should be in bank deposits.

    for HK stocks, please buy LINK REIT (0823), HK & China Gas (0003), HKT-SS (6826), SPDR Gold, (2840), Yuexiu REIT (0405) and China Tower (788).

    a few overseas ETFs should also be considered as well:

    -SPDR S&P 500 ETF SPY
    -Invesco QQQ QQQ
    -iShares Russell 2000 ETF IWM
    -iShares iBoxx $ High Yield Corporate Bond ETF HYG

    for lower brokerage fees, try smaller banks .. and please use this website to compare..

    https://www.moneyhero.com.hk/en/secu.../stock-account

    Lastly, she can consider buying life annuity after retirement..

    https://www.hkmca.hk/eng/

    Last edited by nivek2046; 10-10-2019 at 11:14 AM.

  10. #10

    Join Date
    Feb 2009
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    8,280

    I don't like the idea of her consulting with a HSBC money manager. They will just push whatever gets them a bit of commission. I was in Standard Chartered the other day enquiring about how to open up one of these $60k MPF accounts so I can effectively get the $10k tax savings. The bloody idiot tried to sell me some bullshit plan investing $60k for 5 years, then some other bullshit happens for the next 20 years, then might have some benefit when I'm dead. He didn't stop talking but I had no interest and gave up. Seems they dont have a basic TVC mpf plan.


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