I am a graduate this year, and about to start my work soon. I have 15k of savings in total. Should I invest part of it, or should I simply use this money to build up my emergency funds? - Seedly
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Anonymous

Asked on 18 Jun 2020

I am a graduate this year, and about to start my work soon. I have 15k of savings in total. Should I invest part of it, or should I simply use this money to build up my emergency funds?

Currently I have 10k in Singlife and 5k in Jumpstart. How much of the 15k should I invest?

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Zi Shuen
Zi Shuen
Level 5. Genius
Answered on 24 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 $15k, save $3-5k 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). Just leave the money in your existing Singlife account, since SCB Jumpstart has dropped the interest rate to 1%.

  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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Question Poster

24 Jun 2020

Thank you for such a detailed response! ^^
Zi Shuen
Zi Shuen

24 Jun 2020

Pleasure to help, hope it gives you a clearer view. Feel free to contact me, would love to share more. Cheers!
Wilson Nid A Break
Wilson Nid A Break
Level 9. God of Wisdom
Answered on 20 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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Above all, you should build up your emergency funds before you invest. Here is a guide to understanding your cash flow: Understanding Your Personal Cash Flow

And the reason is simple. When an emergency occurs, are you willing and able to liquidate your emergency to fund your needs? If the investment suffered from a loss, will the remainder be sufficient to tide you through the crisis?

With this in mind, you need to evaluate your situation and understand the risk that you are willing and able to tolerate to that end.

I share quality content on estate planning and financial planning here.

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Vinnie Goh
Vinnie Goh
Level 2. Rookie
Answered on 19 Jun 2020

It is important to ensure that you focus on repaying off any loans/debts and building up an emergency fund before you start investing. There are no guaranteed returns on investments so you don't want to be in a situation whereby you have negative returns and struggles to get by on a daily basis. You can also check on your current insurance coverage to address any gaps and if possible tap on your company's benefits as well before buying more coverage.

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Sharon
Sharon
Top Contributor

Top Contributor (Jul)

Level 6. Master
Answered on 19 Jun 2020

You can look at dollar cost averaging a.k.a. start small and put a bit of money aside every month into funds or ETFs. You can invest but don't go all in.

Do note of the charges that comes with it. Your returns are not guaranteed but your costs are definitely fixed, so good to ensure these costs don't eat too much into your investments.

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P
PillowCase
Level 5. Genius
Answered on 19 Jun 2020

Hey there.

If you are considering high-interest savings accounts, CIMB has recently announced today that they will be revising their interest rate for FastSaver. You might want to take a look here.

Other alternative choices that do not require spending/minimum sum include:

Singlife Account (2.5% p.a, capaital guaranteed, interest non guaranteed)

FSM Auto-Sweep Account (1.05%p.a, interest rates may be revised)

Stashaway Simple (1.9%, capital non guaranteed, interest non guaranteed)

SCB JumpStart (1%p.a)

Crypto.com Crypto Earn (Depending on currency, as high as 16%p.a without any prior staking. However, do take note of the volatility of cryptocurrencies)

Vivid Account (1.05% p.a for first 10k, 1.30% for 10k-20k)

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Ng Wei En
Ng Wei En, Analyst at Mastercard
Level 6. Master
Answered on 18 Jun 2020

Keep in mind of the following before you think about investing:

  1. Setting aside an emergency fund. Would personally recommend 6 months but given current economic climate, may wish to consider 9 months or more. This fund should be able to fund your typical expenses for the set duration of time.

  2. Repayment of tuition loan(if any). If you have taken up a study loan or used your parents' CPF for your tuition fees, you may need to start planning your repayment schedule(e.g X amount per month over X years starting from X)

  3. Ensure adequete insurance coverage. Make sure you are adequetly covered with the key insurance policies such as health insurance, term/whole life as well as critical illneses. Find a financial planner that you can trust.

  4. Getting a job/regular income first. The graduating class of 2020 is definitely having a hard time securing a job. Since you mentioned you're about to start work soon, I am happy for you. Many of your peers from the graduating cohort of 2020 are still having a hard time landing a job. You may want to settle in your job first and get a sense of whether you will be staying on for some time before committing to investing. This is to plan for a worse case scenario in the event that you leave the job due to unsuitability, at least you have a bit more savings to tide you through the job search process.

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