5 Ways To Invest Money That Are Better Than Buying Toto

Many Singaporeans put their faith in the lottery to get rich. However, the chance of striking the lottery is extremely slim, you would be better off finding other ways to put your money to work, such as investing it.

Buying Toto is Singaporeans’ favourite pastime (next to shopping, eating, and complaining that is). And in case you haven’t noticed, this year’s Toto Hongbao draw of S$19.4 million was the biggest draw since 2000.

However, according to Interactive Mathematics, the chances of winning the grand prize in Group 1 in Toto is 1 in 13,983,816. In fact, you stand a higher chance of getting the following:

• Struck by lightning (1 in 1,000,000)
• Becoming a movie star (1 in 1,500,000)
• Hit by a part of a plane falling from the sky (1 in 10,000,000)
• Possessed by Satan (1 in 7000)
• Elected as the President of the United States (1 in 10,000,000)

Despite the science, Singaporeans are still willing to endure long queues and place their bets to ‘huat big big’.

While there is nothing wrong with trying your luck to win big and get rich, the smarter way is to put your hard-earned money into investments as the probability of getting better returns is higher. Without further ado, below are 5 ways to invest money that can make you rich faster.

1. Invest in the stock market

If you’re looking to receive dividend payouts or capital gains, investing in stocks is probably the best way to build your wealth. Many successful investors have also become rich by investing in the stock market. 

Although there’s no guarantee that you will gain in the stock market since stocks can depreciate as well, the chances of getting a return from your investments is still higher than winning the lottery. 

Say you spend an average of S$100 per week on the lottery; you would have spent S$5,200 in a year and S$104,000 in 20 years (which is the typical investment timeline for stock investment). Keep in mind that there’s no guarantee of winning the lottery.

For comparison, let’s say you invest the same amount into the S&P 500 index, which has an average annualised return of 10.5%. In 20 years, you would get S$348,384.62 in returns. 

Remember also that the stock market has also undergone many crises throughout its history, including: World War 2, the Cuban Missile Crisis, 9/11, the Great Financial Crisis, and the 2020 stock market crash due to the COVID-19 pandemic.

Despite that, it has remained resilient and continued to grow. 

If you want to invest in stocks but want something that’s less risky, consider the S&P 500 index via stock Exchange Traded Funds (ETFs) or index funds. Some examples are S&P 500 ETFs and index funds include Vanguard S&P 500 ETF, Vanguard 500 Index Fund Admiral Shares, and iShares Core S&P 500 ETF.  

When investing in individual stocks, remember to understand your risk tolerance; if you have a higher risk tolerance and want higher capital gains, invest in growth stocks. 

On the other hand, if your goal is wealth preservation, then buy blue-chip stocks that offer good dividend returns.

Blue-chip companies generally have reliable growth and offer stability, but their stocks tend to be more expensive. You can also consider buying fractional stocks which allow you to reduce risk by diversifying your portfolio. 

One way to start buying stocks  is to look at the top 10 companies in the S&P 500, or the top companies in an ETF stock.

However, you can also gauge a good stock by researching the company, including looking through their financial statements, following the company news, looking at its balance sheet, dividend yield, and so on. 

Ready to start investing? Compare the best online brokerage accounts in Singapore now.

2. Bonds

If you’re a conservative investor, consider adding bonds in your investment portfolio. 

When investing in a bond, you would ‘lend’ money to an investor or a borrower such as a company or the government to fund its operations.

In return, you will receive a fixed amount of interest every year (also known as coupon rate), as well as your full principal amount once the bond matures. 

One of the most popular and best bonds around is the Singapore Savings Bond (SSB). SSB is issued and backed by the Singapore government and therefore has very low risk.

The maturity period is 10 years; however, you’re free to withdraw your money before the maturity stage with no early withdrawal penalty (but also risk losing out on higher returns).

At the time of writing, the interest rate starts from 0.71% and goes up to 2.28% in the 10th year. 

Aside from that, you can also invest in bonds offered by private companies or banks. Typically, they offer higher interest rates compared to SSB and have no maturity stage. Therefore, you would need to sell the bond in the open market or to another investor if you want to get back your full principal amount.  

Bonds are considered ‘safer’ investments due to the fixed rate of return and are less volatile compared to stocks. This offers more stability (even during market crashes) which is useful if you depend on your investments for income, especially during your retirement years. 

However, the drawback of bonds is that you may have difficulty selling if interest rates climb. That’s because the interest rate of newly-issued bonds will rise in line with market interest rates.

So, if you’re holding on to an older bond, you will be stuck with a lower interest rate. (conversely, if the interest rate declines and your bond has the ‘original’ higher interest rate, then it will be more attractive to other investors if you decide to sell.)

Another caveat is that there’s also a risk of losing your money if the issuing bond company goes bankrupt. To avoid this, you can look at the credit quality of the bond issuer to get a better sense of whether it’s a good or bad bond.