I am a fresh grad with about $40k in my savings accounts. I want to start doing long term investments but I am overwhelmed by the options I have. Any advice? - Seedly
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Anonymous

Asked on 03 Jun 2020

I am a fresh grad with about $40k in my savings accounts. I want to start doing long term investments but I am overwhelmed by the options I have. Any advice?

Hello, I'm a fresh grad and I have about 40K in my savings accounts. I would like to start doing long term investments to ensure I'm financially equipped in my later years and am at a loss right now. I seem to be overwhelmed by the options I have (Investments, SSB, ETF, Savings accounts) and am unsure of what to do and reading the seedly guides confuse me a little :/ I would like to hear some thoughts?

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Hey there!

Great job on achieving that sum of money after freshly graduating!

You don't want to go into SSB now because.. rates now are really low. Savings accounts wise, there will probably be a huge dip in the interest rates across the board; highly unlikely anyone will be spared.

You might want to look into your insurance protection needs first before embarking on investing. Reason being, in the unfortunate event something happens, you won't have to liquidate your investment to meet that pressing need. Insurance provides that safety net.

For beginners starting to invest, you can consider doing dollar cost averaging, ie. Setting aside a sum of money every month. That is way better than stock picking at the start and eliminates any form of emotional interference from it.

Do your due diligence, you can pick a robo, go for an ILP with a trusted agent or use online brokers :) All the best!

Financial planning is an integral part of life. You can reach me here to find out more.

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Einsny Phionesgo
Einsny Phionesgo

09 Jun 2020

Personally I started from index investing STI ETF at 24 via monthly investing (OCBC) and now at 30 I have slowly added on exposure to safer US market like S&P 500 (Ticker: SPY) (you can open with Saxo/TD Ameritrade), Gold for diversification (GLD), and add technology stock (ie. Apple, Zoom, Google). Tried ILP (holding 8 years) but the return is horrible -> only earn 200 SGD after 8 years. My risk-appetite is Medium. If you need insurance then go for term-life and hospitalization. Buy term and invest the difference in low cost index fund. Do remember to keep 6 months emergency fund in liquid cash so you wont force to sell your stock during bad times. Only invest in money where you don't have to use in the next 3-5 years. Start from something easy (STI ETF) and slowly diversify your portfolio (to US and worldwide indexes) once you learn more about the market and your own risk profile. The key is consistently for the compounding effects to work. Save parts of your salary and invest in stock market. Improve your skillset/value to the marketplace and get paid more. You will thank yourself in the future for starting investing at such a young age. Good luck!
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Jack See

12 Jun 2020

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Zi Shuen
Zi Shuen
Level 5. Genius
Answered on 05 Jun 2020

Hi Anon,

I am 24 right now and am graduating next year, I believe we are around the same age. I totally understand that you are overwhelmed by the tons of options available out there, and everyone tells you different things due to their personal interest/ experience/ knowledge. I would like to share with you what I would do once I graduate next year for your reference.

  1. Out of the $40k (I am assuming that's everything you have), save $10k in a high yield savings account as your emergency fund just in case something bad happen (you lose your job, an urgent medical situation, etc). You can save the $10k in Singlife account which generate you 2.5% p.a. I would've suggested SCB Jumpstart too but they just dropped their interest to 1% so Singlife is the best one at the moment (though no guarantee they wont drop their rate too)

  2. Get a term life insurance and hospital insurance. If you have any trusthworthy friends selling insurance, get these 2 insurance to protect yourself against any uncertainty.

  3. Yes, time to start investing! We are still young, so our goal now is to grow our capital as fast as possible and as aggresive as possible (but hey I am not asking you to gamble). We have at least 3 decades to grow our wealth, so invest in something that can generate us higher return (though riskier) instead of the safer ones such as fixed deposit and bonds. So aim higher! Below are the options you can explore, pick 1, or even do both:

3.1. Regular Savings Plan, if you do not have sufficient knowledge and confidence to start picking individual stocks yet, start with RSP, it will not go wrong. Options available now are POSB, OCBC, Phillip Capital and FSMOne. I'd suggest go with FSMOne RSP as they have the lowest fee ($1) and provide the most options (even international ETFs). You can DCA a couple hundreds into each ETF every month, such as iShares Core S&P 500 ETF, iShares FTSE A50 China Index ETF, Vanguard FTSE Emerging Markets ETF, Fidelity® MSCI Information Tech ETF (note: these are my choice, you can choose other ETFs that you personally like on the platform)

3.2. Robo-advisors. They are pretty solid option as well, you just have to answer some questions and they will provide you with a customized portfolio that cater to your goals and risk level you are comfortable with. If you want to maximize growth (comes with higher risk), choose a portfolio that has the highest risk-reward. You can invest a lump sum or just DCA every month. Some options are StashAway, Syfe, Endowus, Digiportfolio, Kristal, etc. Personally, I would go for StashAway for general investment and Syfe for their newly launched REIT portfolio.

  1. Both of the options above are pretty 'passive' as it requires minimal effort on your end, so you can focus on your work and maximize your earnings as much as possible (learn some new skills, impress your boss, get your promotion, and invest more!). In the meantime, start learning about investing and stock picking. There are many courses and investing books to get you started. Once you have equipped yourself with sufficient knowledge, you can start to invest in stocks with high growth potential (instead of dividend stocks). This will further accelerate your FIRE (financial independence, retire early) journey. Of course, if you think stock picking is time consuming and you have no interest to do this at all, you can definitely stick to option 3.1 and 3.2. If you start to invest consistently at the age of 20+, you can live a very comfortable life when you are around 50 years old (instead of 65 :D)

Hope it helps, cheers!

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Oh Yi Ning
Oh Yi Ning

09 Jun 2020

I have a RSP account with FSMone into VOO :) Great advice Zi Shuen!
Zi Shuen
Zi Shuen

09 Jun 2020

@katrina, you can RSP to S&P500 through FSMOne into VOO as mentioned by Irfan and Yi Ning :)
Jayden Tan Ka Jie
Jayden Tan Ka Jie
Level 2. Rookie
Answered on 07 Jun 2020

Advice to read on macro outlook posted by banks and follow well-known investors like Warren Buffet and Ray Dalio on their market views and investment portfolios. The thing about insurance/financial advisor advice is that they tend to be generic which you can't fault them to be right or wrong - i.e non-meaningful. In addition, take it with a pinch of salt as their advice will generally entails purchasing ILPs which leads to buying their insurance firms' mutual funds/ unit trusts that they have an invested interest in (i.e commissions) so be aware as well.

With that being said, it's true to be financially protected first and healthcare in SG is expensive. Hence get yourself covered with hospitalization plan and term insurance that protects you in case of any unfortunate events, but be careful of being overinsured!!! (5-7% of your annual income or up to a limit of $3k annually should suffice at your stage of life)

As to how to grow your capital, honestly if you don't work hard for your money your money won't work hard for you. So read up more on investments stuff, do a thorough research and analysis before investing. If u r lazy or simply no time to track ur portfolio constantly, suggest to diversify ur portfolio into different asset class and invest in ETFs that follow broad indices (e.g Vanguard Technology ETF). Many ways to go about doing which google is ur best friend and teacher. Hope this helps.

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Philip Ho
Philip Ho, Value Investor at Retirement
Level 2. Rookie
Answered on 09 Jun 2020

Congratulations on your graduation. You have a long runway of more than 20 years to invest. You are at my older daughter's age. This is what I recommended to her after setting aside emergency funds & insurance for insurance's sake (not for investment returns because you can do it better yourself):

  • maximize CPF contribution into your SA account to earn 4% compounded till you are ready to withdraw at 55 and minimize use of your OA account (repay your housing with cash if you can) for housing to maximize the compounding of 2.5% interest rate. check out the 1M65 math https://dollarsandsense.sg/1-million-65-using-cpf-heres-math-behind-1m65-concept/

  • Invest in S&P500 ETF

  • Value investing in high quality US & Chinese companies which have little/no competition and will be around 20 years from now. This is Warren Buffet's investment strategy.

My teacher in value investment is Adam Khoo (watch this for how he values companies https://youtu.be/4fY-RVB39Dw). My portfolio YTD is up with double digit gain because I invested more into high quality companies when they were discounted during the recent March/April sell-off.

I cannot recommend his courses enough. I wished I learnt from Adam when I was your age instead of buying unit trusts that banks recommend. I could have retired earlier.

Wishing you a good FIRE journey!

with warmest regards

Philip​​​

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PM
Pat Moan
Level 3. Wonderkid
Answered on 09 Jun 2020

The best thing to do is to spread your investment budget into two phase, phase 1, invest 60% in stocks and bonds at AmexSFC, ICmarket Ameritrade and apply G19 autotrade software for high daily returns and grow like Warren buffet (2) invest in agro commodities. It will give you high returns because of Covid-19 outbreak.

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I
Irfan
Level 3. Wonderkid
Answered on 09 Jun 2020

1) Before investing, ensure you have adequate insurance protection. Basic hospital plan is a must a rider is great but not necessary. Basic is sufficient for most government hospitals. Rider is only if you want to go to a private hospital for treatment. Life insurance is only needed if you have dependants. Since you said you are a fresh grad, i am assuming you arent married of have children. Therefore life insurance is not necessary. If you really want to get Life, go for term. Don't fall for marketing bullshit about Whole Life. The money you save on term life insurance can be invested to make potentially better returns when compared to Whole life.

2) Ensure you have adequate emergency reserves. Stash some cash in condition-free high yield accounts like the 2.5% Singlife accounts or CIMB FastSaver which offers up to 1.8% per annum without annoying conditions like crediting your salary or spending on their credit card.

3) Before investing, kindly read up and research on whats available on the market. RSPs, roboadvisors and self DCA comes with numerous pros and cons. Study before entering the market. Read up on the various brokers and the services or markets they offer. Look through investing subforums, like Money Mind on HWZ or even the investing subreddit on Reddit. This is very important. We've all heard stories of new investors who bought stocks or ETFs on the advice of family, friends and the internet only to be burnt because they didnt understand what they bought, like Hyflux for example. Always research on your risk appetite. There are numerous resources available where you can find out about your investment risk appetite. Also, try to understand your reason for investing. Is it for early retirement? For the purpose of "passive income"? Your reason for investing wil determine the type of stocks/ETFs you invest in.

4) ONLY INVEST MONEY THAT YOU ARE WILLING TO LOSE. This is very important and links back to point (3). If you are not prepared to lose up to 50% or more of your investment value, perhaps you are not ready for investing in the stock market. Try safer alternatives like SSBs, SGSs or Fixed-Deposits. Relatively low returns but also very safe.

Have a great investing journey ahead.

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Eileen Foo Wan Yun
Eileen Foo Wan Yun

09 Jun 2020

This is so helpful 👍
K
KxR
Level 3. Wonderkid
Answered on 09 Jun 2020

I suggest you look into things like ARK ETF & VTI (Vanguard ETF), invest a lump sum and then keep adding what you can save every month from your paycheck. It will be hard to beat the inflation with savings accounts now.

I would not look at Roboadvisors as you can do most of the things yourself, including rebalancing and DCA without paying any fees. In the end index returns beat most of the hedge funds and investors out there.

Also invest in yourself and learn new things, thats the best thing you could do!

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TC
TS Chua
Level 3. Wonderkid
Answered on 08 Jun 2020

Age is your strongest advantage. With 40k, basically you can earn a free trip every year by earning 7% return thru robo invest. Don't waste money on SSB, FD or saving account. You may start with robo invest with highest risk profile then pump in money every month or quarter.

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Wilson Nid A Break
Wilson Nid A Break
Level 9. God of Wisdom
Answered on 08 Jun 2020

Go to libbyapp.com and login via your NLB account, and go borrow as many personal finance / value investing books. Borrow books that are written from a practictioner perspective. Can start with beginer friendly:

The Five Rules for Successful Stock Investing by Pat Dorsey

The Ultimate Dividend Playbook: Income, Insight, and Independence for Today's Investor, Josh Peters

If books are not your cup of tea, there are a couple good US financial youtubers to follow

Graham Stephan: https://www.youtube.com/channel/UCV6KDgJskWaEckne5aPA0aQ

PPCIAN: https://www.youtube.com/channel/UCXtrYuGksGkkyls50lPWvYQ

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Ng Wei En
Ng Wei En, Analyst at Mastercard
Level 6. Master
Answered on 07 Jun 2020

Will keep my suggestions short and sweet.

  1. Ensure adequetue insurance coverage and protection so that your dependents and your well being is taken care of in case of an unfortunate event

  2. Reduce high interest debt that would likely be difficult to beat with your desired investment options.

  3. Instead of going through all the available investment options, I would just cut to the chase and recommend you the best strategy for most people. The strategy would be to DCA into an index like the S&P500. This can be done by buying into ETFs directly with a broker or simply go through robo-investing platforms like StashAway, Syfe, Endowus, Kristal.AI.

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Colin Lim
Colin Lim, Financial Services Consultant at Colin Lim
Level 7. Grand Master
Answered on 07 Jun 2020

Hi, wow that you managed to save 40k.. Took you how many years to save?

Anyway a point to note is that have you set aside emergency funds? Should be around 6 to 12 months of your income or expenses.

How to allocate emergency funds

Example:

Income come in spilt into 50% expenses, 10% into insurance, 10 to 20% to emergency funds. The rest go into investment.

You can first start your investment journey by doing passive investing( robo advisors, investment linked products),

In your later years whereby you have more income and more experience... You can start to active investing, all these takes time and effort.

Hope i have give u an idea.

If you are unsure, you can pm me.

#planwithcolin

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ZT
Zachary Teo
Level 6. Master
Answered on 03 Jun 2020

Hey! Awesome with that $40k savings! I think first off, get yourself a fixed deposit account, I know the rates are bad now but having to put some money into a fixed deposit helps you to ensure that you have proper savings for the future.

Next, I would suggest to take up an insurance plan. Life plan to be exact. Then, I would suggest that you put the remaining amount into ETFs. Look for diversification rather than narrow stocks.

Lastly, if you still do have money left. Go buy a lot of stocks from a company you love and believe it will do well in the future (say 10-15 years).

Otherwise, get started with Seedly's beginners guide to investing article will be helpful too!

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