Should I invest or save if I'm still young and have little capital?

I constantly see that one should start investing asap and while young because compound interest can add up to a lot. However, financially speaking there are a lot of service fees/ hidden charges in regards to investing and with low capital the charges eat up quite a lot. My only current worries for the next 5-10years is university education which I plan to use CPF to pay with. Other than that I have little expenses so is it wise to invest whatever money I have left?

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Discussion (9)

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DunSayBojioHor

13 Nov 2022

Start young to gain experience, knowledge and compounding effect.

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Wilson Nid A Break

11 May 2020

Even if you had an abundance of starting investing capital, but if you paired it with a deficit in investing knowledge, its still gonna lead you to a diastrous start.

Go to libby.com, and start borrowing all kinds of personal finance / value investing books to brush up your financial literacy while you incrementally build up your investing capital at the sidelines.

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Pang Zhe Liang

11 May 2020

Fee-Based Financial Advisory Manager at Financial Alliance Pte Ltd (IFA Firm)

Before you start investing, you should spend quality time to do an analysis on your current situation. For instance, conduct a comprehensive planning on your current cashflow.

Here is a Guide:

Understanding Your Personal Cash Flow

Thereafter, you should ensure that you are sufficiently insured. This is especially important for healthcare. After all, you won't want to feed your investment returns into your medical bill.

More Details:

Is MediShield Life enough in Singapore

Integrated Shield Plan Singapore: A Starter's Guide

Once you have the basic structure covered, ensure that you have sufficient emergency funds. As a general guideline, this is 3 to 6 months of your total expenditure. Meanwhile, you should only invest money that you can afford to lose. This is because investment only yields non-guaranteed returns.

Once you have done the above, then you are ready to start embarking onto your investment journey. And yes, you should start early and let compound interest do its work. However, this is only possible after we have built a strong foundation. Otherwise, we are putting our money at risk, e.g. forced to liquidate investment portfolio.

I share quality content on estate planning and financial planning here.

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Aaron Leow

11 May 2020

Focus on your income.

Basic Life Budget: https://www.aaronleow.com/life-budget-calculator

To answer your question specifically. Invest into a S&P500 index fund and forget about it if you have no need for the money in 10 years. If the money is needed for liquid events, hold cash or fixed deposits, or highly liquid 0.5-2% yielding instruments.

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