03 Nov 2020
Should I be investing that money in ETF (a robo advisor) and potentially grow that money? Or should I just keep it in a savings account. I'm fine with a loss of max 2k if investing.
I usually ask myself two things before I invest:
In your case, if you need the money in the next 3-4 years, it is best to invest it in very low-risk instruments with high liquidity. You can take the risk to invest in ETF and returns can potentially be more rewarding. Liquidity is also not an issue for most ETFs. However, should there be a significant market correction in 3-4 years, you won’t have that much time to allow your investment to recover. The extent of market correction is not something we can control and I’m certain everyone knows it is not sensible to realise the loss during such a time.
Assuming you’re fine with a loss of max $2K, that is about 6.67% of your total $30K capital, which seems to suggest your risk tolerance is relatively low. Investing in instruments such as ETFs in the next 3-4 years is possible but your risk tolerance will have to be bigger.
In my honest opinion, you can consider going for lower risk instruments such as cash funds offered by Singlife and Endowus accounts. Though the returns are not as high compared to ETFs, they are much lower in terms of risk. You could consider investing in ETFs for a longer term goal such as retirement.
I hope my thought process helps you!
Option: safest to risky
1) Fix deposit (1%+)
2) high yield account eg. Dbs multiplier- 3.8% max (T&C)
3) Money market fund (0.x%)
4) bond UT (3%+ p.a.) monthly dividend (very stagnent). Eg pimco fixed income.
5) equity fund (3%+ p.a.) monthly dividend (some growth). Eg. UOB global quality fund
If only $30k wont suggest ETF, if you only willing loss $2000. There is a potential to grow higher but if there is a correction portfolio can down 30%.
With very low risk investment, typical return is 3%+. So around $3.6k+ after 4 yrs. Is it acceptable?
$2,000 / $30,000 is approx 6.67%. Given your short investment horizon and conservative risk appetite...
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