I do not have 6 months of earnings but I want to invest in shares/stocks like Starbucks for instance. Any advice?

Hi anon,

I was like you starting out, I did not have at least 6 months when I first started building my portfolio, just steady income from a not-so-steady job outlook. Bad idea, absolutely, but I didn't like the idea of falling behind on all that "sweet compounding earnings". That was me, now this is my take:

1. Situation

A lot of answers assume that you're a working adult, or at least an independent person taking care of themselves. If you're a young adult still living at home, working a first job that your parents are covering your meals and housing, or if you're part of a big family that already has sections of your home allocated for adult life so you probably aren't moving out soon, you have a little wiggle room here. But if you aren't, then cover your bases and foundations first is a good tip.

2. Capital

If you don't have 6 months of living expenses, then you probably also don't have a lot of capital to lose. Not that this bad, but consider this, D01 (Dairy Farm, or company for Starbucks in Singapore) requires 100 per lot, meaning you have to buy groups of 100. Do you have that $400 or so to buy in? $SBUX for the US is "just" $8 for per one which is a lot in itself, sure. But your commissions and fees will absolutely slaughter any earnings. You'd simply not have the capital to make a decent dent and make the fees worth it, even if they are from a low-cost broker. And holding on to a single share of SBUX, while I will tell you is absolutely exhilarating the first time, it will quickly dawn on you that this is ultimately just for fun, as gains you're looking at are in cents after months of holding, after fees, and that's assuming it appreciates in value.

3. Alternatives

So we're in this far and perhaps you're thinking you've still got your heart set on putting your cash somewhere. Consider maybe a Regular Savings Plan, or one of those roboadvisors (I'm unaffiliated with any). It's not going to be as thrilling as watching numbers just rocket (to the moon! Great, now everyone else knows where else I hang out), but it's something. You'll make a few dollars here and there and it's (comparatively!) safe. At the end of the day though, the real wow moment will just be from that will come from having a fund that you've slowly and diligently saved up; the gains, probably not so much.

Now, what you do with that hoard of savings after a year or two once you're more secure on the expenses portion, that's up to you. Good luck!

To help us give better opinion, you might also want to gave us a bit of background,

Do you have a portfolio currently? are you a beginner fresh grad? if still young, are still able to live off your parents. How is your job security? Also what is the main question about; emergency cash, stocks, or how to buy stock without extra cash.

I'm going to reply based on my current situation, as I'm also squeezing out funds to buy some stocks.

1) This is technical. You don't need 6 months "earnings". You need 6 months "basic living expense", so exclude the costs of luxuries.

2) The amount for emergency cash actually varies from 3 months to 12 months, depending on the volitility of your situation (for example, a student still living off parent, might not need this emergency cash, or if you are a civil servant, maybe 3 months emergency would suffice, agents that depend on comissions might need 12 months)

3) Low risk sources other than cash. Do you have at least 3 months in liquid cash and another 3 months worth else where with low risk, say in SSB?

3) Do you have a portfolio, during this period, I'm rebalancing my portfolio by identifying the stocks I own that haven't been doing too well or are rather dormant before COVID-19 and selling them to buy good stocks at a discount. But note, I'm selling them before buying.

Above are the method to squeeze out cash.

For purchase methods;

1) Regular savers - Someone already mention so I won't go into detail, but you can buy some overseas stock and SG stocks with this method.

2) CPFIS - you can invest with your CPF if you are getting certain SG stocks.

If you only have limited funds, I would advise that you check out this thing called RSS (Regular Shares Savings). Investment cost is as low as 100/mth, this will allow you to invest into various stock counters and ETFs using the dollar cost averaging strategy. You can Google for more info. This would be a good way to begin your investment journey while you continue to build up your cash reserves and more importantly your knowledge on the stock market.

Hello there! I can sense your eagerness to kick start your investment journey. However, Investment is not as easy as just going to the exchange and buy a stock; as you really need to understand why you are investing and what are you getting yourself into. Rushing to buy starbucks stock now without any game plan wouldnt make you better off financially in the future. Since the general guideline is to have a minimum 6 months of expenses in your bank account, it is okay to have 5 months worth of earnings as part of the emergency funds. Only you know your financial situation best.​​​