New to investing? Start small with just S$1,000. Here are some tips on how to get your money to work harder for you, without relying solely on low-interest savings accounts.
Unlike the past when investments were only catered to the rich with huge capital, the barrier to entry is actually really low now. With some investment products that require just S$1, you can actually invest in a number of vehicles, though your gains won’t be that significant.
If you’re just starting out as an investor, the good news is that S$1,000 can indeed make a difference. Of course, if you’re expecting your funds to grow to S$100,000 overnight, I’m sorry to say that there’s no magic potion that exists. But it will be a good start on your investment journey. It doesn’t matter how old or young you are, the time to start is now.
You can also think of this S$1,000 as converting a part of your “fun” fund into your investing fund. If you haven’t made any travel plans yet, you can consider using this to kickstart your investing journey and make the money grow into something bigger down the line.
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1. Think of your future
Before you even think about pumping your money into the first investment vehicle you’re reading about, it’s best to just think about how your investments can help to pave the way for your future financial success.
What are the financial goals you want to achieve? Out of them, classify them into short-term or long-term goals and prioritise them accordingly. Are you planning on buying a house in the next five years or are you solely saving for retirement?
It will also be useful if you can plan how you can finance your investments. Concentrate on building your wealth as well by seeing how you can increase your income and savings rate. Though the initial investment sum is somewhat important, the frequency of your investment contributions and the sum that you’re investing in matters more.
2. Read up on news about current market conditions
Regardless of what investment vehicle you choose, it’s good to read up on the market movements and the situation now to influence your investment decisions.
For example, with the ongoing Russian-Ukrainian conflict ongoing, some of the industries that have taken a hit are the metals and mining, construction, consumer packaged goods, and oil and gas sectors. If you’re one to buy during the dip, this would be beneficial for you when you do stock-picking.
Even if you’re not confident about picking your own stocks to invest in yet, it will still be useful if you know what’s going on in the market. Are tech stocks crashing? How is inflating impacting the market? These bites of information will help you decide what kind of investment vehicles you are comfortable going into now, based on their asset class allocations.
You can also follow savvy investors or financially prudent wealthy businessmen for tips and tricks on how they are investing — they must have done something right for them to get to where they are now. However, always take their words with a pinch of salt. With so much white noise going on on social media and the news, it can be overwhelming to get caught up with different opinions and advice. So it’s best you rely on your own research!
3. Invest in high-yield investments (at your own discretion)
In order to expedite the journey towards your financial goals, many would consider taking up a few high-risk investments with a higher projected yield. After all, no pain no gain right? However, this might not be for everyone and are for those who have a higher risk appetite.
If you’re younger, you have an advantage over the rest as you have a longer time horizon to ride out the market fluctuations. Such investments are hence meant for longer-term investments. So trust the process and believe that most investments would appreciate over time especially if you can afford to lock in it for about 10 to 20 years. Some high-yield investments you can consider are cryptocurrency, forex and stocks.
Because they are also riskier products, you should have the mindset of being comfortable with losing the sum that you’re putting in before you go into high-yield investments, since the worst possible outcome would be to lose your entire stash. This is why your investment portfolio shouldn’t only consist of high-yield investments since anything can go wrong.
Kickstart your investment journey with a brokerage account.
4. Complement your portfolio with stable investments
For short-term goals, you should use more stable investments as your wealth accumulation tool. Since you’ll need to meet these goals in a few years’ time, you can’t afford to lose your capital by putting your money into high-risk investments. Even if you don’t have a short-term goal you’re working towards, knowing that your money is locked in a safe investment gives you a peace of mind with this safety net that you have.
Some safer investments that you can consider are fixed deposits, Singapore savings bonds and endowment plans — they all guarantee the interest that you can earn at the start of your tenure, as long as you keep your money locked in for the entire duration. Other investment tools also include bonds and ETFs which are generally safer than stocks.
5. Take advantage of managed funds
If you don’t have the confidence to start off based on your own stock-picking, you can sit back and let your investments work for you by investing in a managed fund. There are certain investment products that you can contribute on a monthly basis, that are entirely managed by fund managers. This means that all investment decisions will be based on them. Depending on the market and their own expert opinions, the asset allocation might change quite regularly based on their own call. However, such investment products are generally a little more expensive as you’ll have to pay a maintenance fee for them to manage your portfolio for you.
There’s also another cheaper alternative — robo advisors. These products are managed by AI and are a lot cheaper than having an expert manually manage your funds for you. Robo advisor platforms usually have higher liquidity, meaning that you can deposit and withdraw your funds anytime and at any amount without resulting in a penalty fee.
If you want to do away with the maintenance fees, you can also manage your own portfolio by analysing the inter-market relationship between the four primary markets — commodities, bond prices, stocks and currencies. They interact with each other a lot based on the changes in market conditions. For example, bonds tend to move higher as stocks move lower, while gold prices go up when the dollar falls.
Sit back and watch your money grow by opening an account on a robo-advisor platform.
6. Consider other unconventional investments
Aside from traditional investments, there are other things you can invest in that are not necessarily what you might expect like watches and fine art. If you’ve got the eye to spot valuable pieces and have an in-depth knowledge of the markets, these pieces can potentially reap you high potential gains when you sell at the right time and to the right people.
If you have capital, you can also consider investing in real estate — whether it’s a property you want to live in or an additional property you own for rental. It’s best to check the rental prices for the property you’re eyeing before committing to it, and since it requires high capital, a lot of research is needed. However, do take note of the Additional Buyer’s Stamp Duty (ABSD) if you’re looking for a second property.
If you can’t afford real estate but are interested, you can consider REITs — a much cheaper alternative with a decent projected yield. Artsy individuals can also look into NFTs that has been gaining traction over the past few years.
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7. Invest in a solid emergency fund
Last but definitely not least, you shouldn’t overlook the importance of an emergency fund. Though putting your money in a savings account will not do much to let your funds grow, you should always have a stash of fully liquid cash that you can withdraw at any time.
Even if you opt for liquid investments like robo-advisors as your savings account, your money is still subject to market fluctuations. Imagine requiring a large sum of money only to realise that your initial capital has depleted because of the poor market performance.
Having an emergency fund will give you a peace of mind knowing that your money is safe in your bank account without fluctuating. This will definitely help if you encounter any unexpected emergencies like an unexpected retrenchment or the sudden onset of a critical illness. Having such funds ready anytime will also prevent any instances of you having to withdraw money from your investments and affect your profits or face any penalty fees.
Stash your emergency funds in a high-interest savings account.