42 yrs old newbie here, is it too late to start for investing? Able to invest in 300 to 500 each mth which is a better option for investing? ETF or Unit Trusts? ? - Seedly

Retirement

Investments

Asked by Frankie Yang

Asked on 10 Apr 2019

42 yrs old newbie here, is it too late to start for investing? Able to invest in 300 to 500 each mth which is a better option for investing? ETF or Unit Trusts? ?

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Hi Frankie, it's definitely never too late to start investing.

But before going straight into 'what to buy', you may want to do some retirement planning. Having a road map and clear goals to be met will help you choose what kind of risk you can take and thus, what kind of returns you need to achieve to hit your goals.

If you don't have this, you won't know how much to buy for how long, and what is good.

Now that you're reaching the retirement age soon, other than just growing your capital, you will need to start looking at capital protection, and building guaranteed streams of income that pays you after you stop working.

This means adding some bonds into your portfolio, looking at annuities to complement your CPF Life, topping up CPF, etc. All these are also equally important investments you need to make to have a holistic approach to reaching your retirement goals.

You may want to sit with your financial advisor to do this with you. :)

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Kenneth Lou
Kenneth Lou, Co-founder at Seedly
Level 8. Wizard
Answered on 10 Apr 2019

Hi there Frankie, it's never to early or too late to start :)

It's great that you are considering this at 42 years old!

I would recommend you to start off by investing in the STI ETF for the first year before you move on to more complex ones (like Unit Trusts) with a higher expense ratio (amount you pay for every dollar invested)

Here's why the STI ETF makes sense for you now:

Straits Times Index (STI)

  • The STI basically tracks the top 30 companies in the Singapore market which are traded
  • These include DBS, OCBC, Singtel, Capitaland etc. (from a mix of industry verticals, you can find the full list below)
  • Fun Fact: The STI is actually used as the ‘benchmark index’ for other funds to peg themselves to. For example, you are a better fund if you ‘outperform the index or a poorly managed fund who ‘underperformed the index’

What is an Exchange Traded Fund (ETF)

  • An ETF is a passively managed investment fund which is traded on the stock market
  • Passively managed because it just tracks the index (for example, buys the top 30 companies based on a certain allocation) hence lower fees
  • Traded on stock market indicates that it has high liquidity of buyers and sellers, which is a good thing for investors

Here's how you can get started easily:

A Regular Shares Savings (RSS) Plan allows one to invest a fixed amount into a variety of Singapore blue-chip stocks or an Exchange Traded Fund (ETF) that tracks the Straits Times Index (STI).

You can read the full version here: https://blog.seedly.sg/which-regular-savings-plan-is-the-cheapest/

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Other than a Regular Shares Savings (RSS) Plan, you may consider a robo-advisor to invest $300 to $500 per month. In most cases, a robo-advisor portfolio consists of globally-diversified index-tracking ETFs. Check out the following reviews for more details:

https://seedly.sg/reviews/robo-advisors

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Alvin Teo
Alvin Teo
Level 4. Prodigy
Answered on 13 Apr 2019

Since you are newbie, I’ll do what I do best, explain in primary school level.

1) I’ll very honest and blunt in saying that unlike many starting young, you do not have much room for experiments or error. Take about 2-3 months to gather info before buying first investment, you can first learn why people invest into unit trust or ETF. Somehow many people regret their first stock purchases in 2-3 months time.

2) For many reasons, ETFs or index funds are considered safer, its typically based on a basket of stocks rather than bonds but it is not crisis proof. many will argue that you can postpone your retirement 2-3 years and carry on working in case of a financial crisis but what if financial crisis occurs during your retirement, are you going to come out of retirement?

3) Buying ETF/unit trust should just form a portion of your portfolio. The other portion that is missing is the fixed income portion which is either bonds/annuity plans. These fixed Income assets will give you returns even during crisis and may even have capital appreciation. To be clear, SSB is not what I meant as it functions more like a fixed deposit than an actual bond because it doesn’t have capital appreciation. Maybe you have CPF but its not enough and it has diminishing returns.

4) Have fun, and at 42 years old, it‘s not worth to lose sleep over any investments.

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