Anonymous
Apart from the $20K, I have another $2K for savings/expenses. Based on this, how much should I allocate for my emergency fund? I intend to go ultra 'frugal' during NS so I'm willing to save/invest $300-$500/mth. I don't have much social life so I think it's achievable. Since I'm still young I'd consider my risk appetite to be medium-high. But the question is how should I start? There are so many ways but what do experienced investors recommend? My ultimate goal is to achieve FIRE.
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Tan Wei Ming
24 Jul 2020
Founder and Writer at Frugal Youth Invests
Hi NSF to be, I am a NSF too. I still have one more year till I ORD.
Before you invest, you need to manage your finances properly.
You can refer to this article that I wrote about personal finance. This article shares how one should allocate their cashflow based on their spending pattern and I also share my own allocation framework that I am followng since enlistment. Hope this inspires you.
As for advice, I recently wrote an article on beginner guide to investing.
https://frugalyouthinvests.com/2020/07/15/my-in...
Here's the key points from the article.
The Four Key Considerations
Do check with your parents for your coverage, I do not think you should take over but maybe review the product after you found a full time job.
Depending on risk appetite, have at least 6 months worth of expenses is recommended. Since you had $20k to invest, I would suggest keeping some more cash as the day to day swing will be huge with a $20k portfolio.
3. Do you have recurring income while investing?
No worries as you are going to enlist in NS.
4. Do you foresee that you have any big ticket purchases in the near future?
Set aside the money you think you will need now. Investing in Stock Market is not an online casino, you do not expect your investment to be profitable right after you bought. We cannot predict the future so if you have big purchases in the short term, do not invest those funds that you need.
My strategy for beginners involves the use of Exchange Traded Funds and Passive Investing strategy. I have two strategies - Robo Advisors or ETF RSP.
Strategy 1: Robo Advisors
Robo Advisors will usually ask you a set of questions in which it will determine your risk level in investing and offers different portfolios based on it. You decide which ETF portfolio they offer and buy it regularly.
Strategy 2: ETF Regular Savings Plan
Instead of answering a set of questions in regards to the risk level, ETF RSP gives you the freedom to choose which ETF to invest in. In my opinion, if you know what ETF to invest in then I would really recommend ETF RSP. I think the rule of thumb in investing in an ETF is to choose one that offers greater diversification like a Total World ETF such as VT or Index ETF such as VOO.
There's a lot more that I discuss in the article, you may read over here(http:// https://frugalyouthinvests.com/2020/07/15/my-in...).
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I’m not an experienced investor, but you could try starting off with roboadvisors like StashAway! That’s how I began passive investing - by DCAing every month, plus the app is rather straightforward and user-friendly so I think it’s good for beginners. It also allows you to select your desired risk level, depending on your risk appetite. And you could research on ETFs too, then gradually explore and understand which ones you’d like to buy.