How would you invest your first 10-20k? - Seedly

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Asked by Anonymous

Asked on 07 Jul 2018

How would you invest your first 10-20k?

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Randall Tan
Randall Tan
Level 4. Prodigy
Answered on 13 Jul 2018

The outcome of investing is to have a better retirement in the future. Think of retirement as a Pyramid - you will need a solid base to work on. My solid base consists of CPF, followed by global index funds (IWDA) and local index funds (STI ETF)

  • 110 minus your age equals the percentage to be invested in stocks and put the rest in bonds (CPF)
  • 50-50 split between local and global stocks

Why CPF?

​Contribution to CPF RSTU and MA helps to reduce income tax. https://www.areyouready.sg/YourInfoHub/Pages/News-Voluntary-Contribution-vs.-Retirement-Sum-Topping-Up-Which-suits-you-better.aspx

Meeting FRS early means that bulk of your CPF funds during retirement will be from the government. (Rule of 72, compounding interests)

Eventually you will meet FRS and MA capped so why not take this chance to reduce your income tax!

Why gobal index fund IWDA?

Why local index fund STI ETF?

  • You do not want to expose yourself to too much currency risk

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Kenneth Lou
Kenneth Lou
Level 8. Wizard
Answered on 11 Jul 2018

This is a pretty good question! In fact it's something which we often discuss about in our community because the first step can really be so hard sometimes.

Make sure you have 3 - 6 months of rainy day funds first before going into investments. That will allow you a buffer for unpredictable events. (eg retrenchment or accidents etc.)

In fact we actually asked some local financial bloggers what they thought of before jumping in with their first $10k: https://blog.seedly.sg/how-singapores-top-financial-bloggers-will-invest-their-first-10k/

Here's my own take:

For someone in the age range, 25 - 35 years old, here are some Investments you can consider: (from most recommended to least)

  • Robo-advisors (for exposure to US and global market indices at low cost) (you can read reviews of the robo advisors here)

  • STI ETF (via RSP a regular savings plan and investing in local SG market index movements)

  • REITs and Blue Chips (stable dividend paying stocks)

  • SSBs (to beat inflation in the long run)

  • Fixed Deposits (for time value that you may need for children's expenses etc at a certain year)

Again, these are benchmarks but you can go and figure out these investment products to properly determine which you are most comfortable with before committing to it. But beyond that, I feel that it is important to take the first step so you are 'vested' to get better. Most people pay market lessons to the market before really learning deeper. You may learn from your small losses, but over time your long term gain and compounding can really be a huge gain.

Hope this helps :) Cheers!

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Soon Xiaohui
Soon Xiaohui
Level 5. Genius
Answered on 12 Jul 2018

hmm I would divide into 3 portion after putting aside the emergency fund: investment fund, opportunity fund & education fund.

Education fund: fund I used to educate myself on investment, this may be on books, courses, etc.

Opportunity fund: is fund which I put aside, until I am ready to invest further or the market is bearish or the market is at the price I wanted.

Investment fund: likely to be amount which I will allocate monthly to contribute into the investment tool(s) which i am comfortable with.

Definitely will combine 3 of them into my portfolio :)

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Junel Seed
Junel Seed
Level 3. Wonderkid
Answered on 11 Jul 2018

I will probably "invest in myself" and get myself well protected with insurance first. Then 5k into STI ETF and maybe 2k intp blue chip stocks to get me started on equities! will aim to diversify my portfolio with stocks and bonds

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Tai Zhi
Tai Zhi
Level 4. Prodigy
Answered on 07 Jul 2018

Passively and diversify the capital across asset classes (stocks; government bonds), geographical markets, industries and companies. This is a more conservative way to achieve consistently decent investment returns.

Remember the research by Standards & Poors Dow Jones shared earlier? Here's the link to the report. Page 6 and 14 shows the summary statistics where an overwhelming majority of professional fund managers underperformed general markets consistently over short, medium and long term.

https://us.spindices.com/documents/spiva/spiva-us-year-end-2017.pdf

If an overwhelming majority of professionals who went through the good finance education, have the best market data/tools at their disposal (eg. bloomberg) and who devote 8 hours a day managing investments can't even match the general market performance, I would suggest investors to carefully consider if they have the confidence to outperform first the professionals and second the general market.

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Chris Chin
Chris Chin
Level 4. Prodigy
Answered on 18 Jul 2018

Good to start with dividend Income investing on defensive stocks that give 6% and above in dividends. Always focus on reducing your Risk, instead of focusing on the Potential Returns., as Higher Returns comes with Higher Risk too. Manage your risk with a portfolio of 6 - 10 stocks. Learn the trips and traps of the Stock Market through Investing Courses, not Forex or trading courses. You either pay below 4k to learn the tested approach, or lose >10k to learn the hard way. Of course, you could read up yourself and test out yourself. Just be mindful that many of these books don't provide the updated details and tools relevant to the countries that you are investing. Attending courses also give you more friends and avenues to get different perspectives on a stock too.

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Anthony Ong
Anthony Ong
Level 3. Wonderkid
Answered on 08 Jul 2018

Something slightly contrarian to the usual diversification response, but I would suggest concentration only on 1 or 2 investments, even if the investment can be a diversified investment (i.e an ETF). There is no need to split the amount across 4 or 5 investments at this stage as this increases your transaction costs (brokerages charge a minimum transaction fee) which in turn increases the return you need to achieve in order to break even. Also, assuming you are continuing to save, this 10-20k will not be the last investment you are making and so you can use your later investments to diversify.

On details, maybe you could consider 1 ETF and 1 stock to split your initial sum. The ETF can give you some diversification, and the stock can give you some practice in analysis and choosing shares to invest in, which will help you in the longer run as well.

Good luck! :)

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Joel Sim
Joel Sim
Level 3. Wonderkid
Answered on 12 Jul 2018

This is based on the assumption that the individual not being good at investing or trading strategies.

  1. Set aside 3 month’s worth of monthly expenses (not income). As he/ she works and saves more, accumulate it to 6 months.

if the individual has a more aggressive profile, he/ she can maintain 3 months‘ of expenses and focus on investing the rest.

  1. Credit Salary into DBS Multiplier account for extra interest without any risk.

  1. Invest into Singapore Savings Bond. Again, there is no risk unless the government defaults

  1. Dollar cost averaging into STI ETF or US Indices tracking ETFs. - I do not recommend robo-investing as individual needs to do proper diligence and research.

  1. Save big on food by tapping on apps such as Eatigo, Entertainer and Burpple

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Gabriel Tham
Gabriel Tham
Level 8. Wizard
Updated on 07 Jun 2019
  1. Dollar cost average into Global ETFs manually or using robo advisor. Every month put a portion.

  1. Put some into Singapore savings bond for emergency usage.

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Gabriel Tham
Gabriel Tham

17 Dec 2018

I currently use Standard chartered. But there are other brokers which have cheaper rates such as Interactive Brokers.
CH Chew
CH Chew

17 Dec 2018

Thanks for your reply.
Hong Min Lin
Hong Min Lin
Level 2. Rookie
Answered on 28 Apr 2019

My take is that there is no hard and fast rule as each investors' threshold for losses and risk taking ability is different.

I would look at my situation and assess a few things

  1. Liabilities

  2. Stability of job

  3. Threshold for taking losses

if you have high amount of liabilities and a job that isnt as stable, my first 10-20k would go into income producing products. Any cash that you hold needs to be stored in a high interest account so they are not left lying around when not deployed.

i.e. OCBC 360, UOB One account or Stan Chart Bonus Saver. Subtle differences in how much you earn and what criteria to be met. That should give you your 2-3% interest on cash up to around 70k in each account.

I personally would maximise these before heading for SGS bonds etc because SGS bonds give a max of 2.5% ish on 10 years and there are different tiering for each year. Only good if u have more than 250k and you maximised the 3 above accounts.

Now, then we move on to what gives better dividends. REITS/ Blue Chip stocks. in my opinion, stocks are alot more complicated than commonly understood. You need to know what the expectations for the company are in the market (i.e. what is priced into the stock) and also understand where the future of the company lies. SWOT analysis etc. So, I generally would not recommend it for regular on the street dude. Individual stock names should make up a smaller proportion of your portfolio.

If you are happy to have the higher risk, higher reward investment into stocks, then opt for ETFs. they have the lowest management fees and they cover a large number of stocks, which means you get the automatic diversification. (I dont like mutual funds and unit trusts because of the high costs involved which is only explained in the super fine prints) and active investing hasnt been proven to be that effective. So you need to do alot of digging into the right fund managers etc.

From my experience, markets is all about timing, timing, timing. So if you invest in one shot, you could put yourself in a scenario of make it or break it. If you think you are technically apt and very good with catching troughs and peaks, go for it. Otherwise, I would recommend monthly investment over 24 months. The rationale is that cycles can play out over 5 years ish (depends what you read). So you are trying to minimise the risk of buying high and selling low. and mathematically, the monthly average works out in your favour. Investing is always about the long term, so try not to look for that 3 month return or even shorter. Thats speculating. (speculating is also one strategy but only when you have loads of excess lying around)

Allow for mistakes. And after you have made one, look back and analyse what you could do better. I am still refining how i allocate my resources and what I want to achieve. and it has been 10 years since I started.

Good luck and have fun!

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Isabella Jo
Isabella Jo
Level 4. Prodigy
Answered on 21 Jul 2018

If this is my rainy fund, I will put in higher interest account which gives flexibility to withdraw any time without much penalty.

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Steph Yeo
Steph Yeo
Level 5. Genius
Answered on 15 Jul 2018

Putting my eggs in different baskets: 1) some in a decent savings account--for me this is the DBS multiplier account 2) some in a stable investment, e.g. SSB or top-up CPF 3) some in sth riskier, e.g. roboadvisor or even P2P 4) some in self-care and self-improvement, e.g. yoga classes, gym membership, books, courses 5) some in building a sustainably affordable lifestyle, e.g. certain cards/apps/memberships for discounts on food/activities/groceries

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Lee Weiyang
Lee Weiyang
Level 2. Rookie
Answered on 12 Jul 2018

Being lazy and risk averse, I'll DCA into STI ETF.

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Chong YanTing
Chong YanTing
Level 2. Rookie
Answered on 12 Jul 2018

If the first 20k is after accounting for emergency funds and your liabilities, I will put around 10k in risk free assets like SSBs or a high yielding bank account. This part is to make sure that I am beating inflation and hopefully gain a little.

The next 10k I will likely split between the relatively more risky investments like stocks, roboadvisors, ETFs, funds, private equity bonds like Astrea etc depending on how active you are as an investor. Remember to do your own due diligence and cost analysis as cost matters more when you are a small retail investor!

Personally I am more conservative so I would prefer a 50-50 or max 40-60 split until I have my emergency funds built up.

Invest if you can spare the money to build your wealth, after building your emergency funds, after reducing your liabilities, after you are properly insured.

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Liwei Kwok
Liwei Kwok
Level 2. Rookie
Answered on 12 Jul 2018

SSB Because i cant afford to lose my capital

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Grace Cong
Grace Cong
Level 4. Prodigy
Answered on 12 Jul 2018

Set aside about 3 months worth of expenses as cash, this is for emergency.

The rest you can split between Singapore Savings Bond (treat as high interest savings) and ETFs either STI or one of the global ones. The younger you are the more you can put in equity vs bonds.

I'm lazy so I would rather keep in ETFs than manage actively. But if you have the expertise and drive to do active trading, then you can keep some of this amount as capital for that.

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Eveline Lau
Eveline Lau
Level 5. Genius
Answered on 12 Jul 2018

I’m more risk adverse so I’ll put some into Singapore Savings Bond first! For the remaining sum, my other options would be to look at would be STI ETF and blue chips.

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Chin Guo Qiang
Chin Guo Qiang
Level 3. Wonderkid
Answered on 12 Jul 2018
  1. Invest $15k in SG Savings Bonds for potential 1.6% - 1.7% annual returns for the first 3 years.

  1. Invest $5k into Blue Chip stocks for extra dividend stocks in the following categories, ie telcos or shipping industries, then keep the stocks running for the next 3 years as well.

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Assuming you have no debts of any kinds; the first 10-20k should go to your emergency funds with a good interest rates. If you have already set aside for emergency funds, then I would set aside into ETF, REIT & robo advisers. Depending on your risk appetite; allocate by %.

For myself I'm not well versed in the investing section so I'd avoid putting everything into one basket. For ETF I used DBS and it's the lower risk lower gain basket for me. Therefore when I uses robo adviser I tend to go medium risk vs being conservative.

Hope this helps!

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Anandveer Singh
Anandveer Singh
Level 1. Freshie
Answered on 25 Apr 2019

First 10 to 20k would be my Emergency fund. (Future proof myself) then monthly put money in a robo invest or investment team. Pay that little commission to ensure that someone is monitoring your investments. esp if you are new to it

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