Singapore Saving Bonds (SSB)
Asked on 16 Dec 2018
Hi, like many fresh grads, I'm stuck in a vicious loop where I don't have much capital to begin with; and can only grow my wealth in small ways like STI ETF or SSB... Even REITS are too expensive for me, because of the brokerage fees. I have $10k-$15k in total savings so far, and can possibly take out $500-$1k to invest. Should I put it into high risk stocks with the focus on growing my capital? (I work in a SME so salary is expected to remain low + no bonus.)
Just like the constant advice I receive here, you ahsould set aside 6months worth of emergency funds first. Make sure you have insured yourself from anything that can stop you from having an income.
If you have 0 experience, then the first thing to invest in is yourself. go learn/take up courses for personal finance.
If you already have an idea, then you probably would want to start with something with lower risk eg STI ETF, or even SSB. Alternatively, you can consider roboadvisors for low effort and lower fees.
After which you can go on to individual stocks and REITS. They key is to diversify, and not to put all your eggs in one basket! Do ask more if you want to learn more, the community is very knowlegable and willing to share! I myself have learnt a lot here!
At this stage, investing into yourself (buying books on sales, communication etc) to boost your income may pay a much higher return over the long run. There are plenty of free materials online and at the library too.
Let's say you earn $500 x 12 = $6000 per year. Even if you earn 10% on that, thats $600 more per annum which will not move the needle over the long run.
Trying to go for "riskier investments" to generate higher returns often ends badly.
Set aside emergency funds, then start accumulating money to invest! You can accumulate those $500-$1k to become $5k-$10k before you start investing!
However, I do not think that you should put your money into high rist stocks if you do not fully understand what you are putting your money in or the risks you are taking. Sure, high risk high returns, but also, high risk high losses!
1) Emergency funds set aside
2) Purchase adequate insurance coverage
3) Excess monies, go for indexing (i.e. STI ETF or ABF Bond ETF) to build some baseline portfolio before looking into individual stocks.
My first advice will differ slightly given you are a fresh grad.
1) understand your own income and expenses. Do a table, draw a chart, or even use Seedly App to help you understand where does your money go to. Understanding your Own "financial statement" aka your Income and Expenses is important.
2) See what you can cut from your I&E. From here, you will see what is your disposable income. This will be your savings and investment portion
3) What are the foreseeable life stage that you are going to do. Getting married, buying a house? Etc etc. Set a target for them. It's OK to have it totally different 5 years later, but the money you saved would not haha!
4) Get 6 months emergency fund up. These can be part SSB (3 months) , part high savings account (3 months)
5) review all your insurance if any. Get health insurance ASAP. Do not wait. And since you are young, you should not wait too long to settle it.
6) You can start a regular savings plan with POSB to buy into STI ETF or even stashaway since they accept $100 a month. I wouldn't advise individual stocks until you know what is fundamental analysis and technical analysis.
7) As with all investment, do have a gauranteed part (your CPF is bond) and non-gauranteed (equities/stocks). This is the final stage as you need minimum 50k to even do stock picking.
Ensure you have sufficient emergency funds (6 month worth for you would be 15k). I recommend going for lower risk investment vehicles especially if you have no prior experience. You can go for blue chip stocks which generally appreciate over time and provide dividends. For a more diversified portfolio, you can consider robo-advisors where some have lower management fees than ETFs. The product allows your investments to be diversifed globally or in different sectors.