Asked on 13 Jun 2018
Hello there, a lot of people will tell you to start reading up etc. that's a given. :)
Let me share with you my personal experience, but this is by no means a formula or financial advise (im not affiliated with any financial institutions too).
When i started to decide what to invest in, i first decided what is my risk profile.
As an impatient guy, my risk profile is quite high, hence i dabbled into US stocks. US tech stocks have been going up so i was lucky to catch some part of it since i started a year ago. US stocks is probably one of the investment product with the highest risk (daily fluctuation of 1-5%).
Understand that my investing journey will be 10-20 years, so i am more focused on building my capital now (because no money) - hence US stocks fits me best because it can provide a decent capital gain in a short period of time (can go both ways), and i can stomach the risk. Other products like ETFs, REITS etc, you can only see the return in 5-10years for the compounding interest to kick in.
After putting in some money into the US stock market, i realize that i need to balance out my portfolio with lower risk investment products, hence i looked into funding society for p2p lending, and then a little bit in SG REITs to build my long team dividend portfolio. These are done using the capital gain from my US stocks, diverted into my smalll dividend porfolio (ie REITs).
So to sum up:
my first 2 years of investing:
US tech stocks for capital gain (super high risk)
balance risk of US tech stocks with p2p lending (medium risk)
my hypothetical 2-5th year of investing (not there yet this is my 1st year only)
my hypothetical 5th - 10 year of investing
slowly build up dividend portfolio and waiting for dividend to compound the returns (medium to low risk)
CPF should have some money (low risk)
And the constant thing from start of investing:
1) Read up, follow financial bloggers
2) Save money
3) Reduce expenses (sometimes it is harder to think of how to make extra S$200 a month, than to cut down on S$200 a month in expenses, both resulting in +S$200 in wealth)
4) optimize on credit card rewards
5) be insured
6) always remember that this is a long game (10-20 years)
At least that's the plan la hahah.
As a first step, you should determine your risk profile though given at a young age your risk taking ability is likely higher, I would suggest evaluate a balanced Kristal like All Weather / All Rounder / Steady Growth based on your risk profile. Or just take any balanced portfolio of US Equities (SPY), EM Equities (VWO/EEM) and Gold (GLD) clubbed with Bond ETFs (try UCITS preferably LQDA or a BND, LQD)
Also do run the algorithm at Kristal.AI (investments upto $50,000 are free) and see what that shows for your profile. Happy to help out if you need more info.
I'd suggest that you go for a robo-advisory platform to do the job of assessing your current financial position and recommend a portfolio strategy after reviewing your risk profile. As for the "catch", I would say that Robo-advisors are still not very different from your ordinary financial advisors as both options will still have a management fee incurred for users. The difference lies with the amount, as Robo-advisors have lower management fees.
I work at Kristal.AI, and my mojo is to help people make the right financial decisions. If you think I helped you, do give me "Thumbs up". If you think my response was biased let me know, I will work on it.
I hope this helps you make the right decision.
Firstly, kudos on taking the first step in investing! You can look into dollar-cost averaging (DCA) every few months through a regular savings plan (https://blog.seedly.sg/which-regular-savings-plan-is-the-cheapest/).
By doing DCA at a specific date each period, you can take advantage of market falls without emotions affecting you. Investing is a long-term plan so one must not be put off by volatility in the stock market.
If you earn more than 20k for annual income, you might like to also topup your CPF SA/MA for tax deduction and enjoy the CPF interest rates.
If your company has a Employee Share Option, max that out as well. for eg. company matches 50% worth of shares for every 100% that you buy (the amount that you can buy is usually capped at a certain percentage based on your salary)
Start learning on investing and do it to beat the index. Three things can happen.
A) you lose every single cent of your capital. In this case, your RSP index would save you as you are still getting market returns,ableit lower
B) you make the same returns as the index. In that case, you lost nothing. Maybe can be the next index fund manager.
C) you make better returns than the market. This is the best situation. Now you can let the RSP be your plan B while you focus on plan A, which is pick your own stocks.
save more money
add on ABF singapore bond ETF using POSB
Increase monthly contribution to POSB ETF investment
wait for many years, collect dividend while waiting
Apart from reading up on personal finance which is good, think you should also develop a way to track your entire investment portfolio.
Get some excel skills, develop a model so that when the time comes you can compare the performance/correlation of the various investments you are in. Factor how to include cash drag in as well, think that is one area that many people miss out on. This gives you a look into your decision making process and allocation, across time that will be useful to refine your future investment decisions.
It is pretty straughtforward now since you have 1 investment and you can probably just look at your statements from POSB. In future though it will be harder to do a like for like comparison when you diversify.
Read up on personal finance and investing through blogs or attending courses.
Also, get your savings and insurance in place first before thinking about where to invest next.
Investments count for nothing if you have no savings to tide through emergencies and no insurance to cover your in unfortunate stuations.
Especially agree on the first liner by Jacky!
Since you are interested in investing, you will be far easier to pick up investing compare to those aren't.
Investing need capital, hence, find more ways to build up your capital, by decreasing expense, or increasing income.
Jacky is far more risk-seeking person, hence he goes on to investment with higher risk. However, it may not suit everyone, especially if one couldn't take the huge fluctuation of tech stocks.
Hence, if you are a risk-averse person, you may start with ETF, REITs, where the risk and price fluctuation will comparably lower.
Before invest, do have your risk protected. Have a good coverage of insurance and emergency funds. So, you wouldn't need to liquidate your investment if the situation arises.
There is a lot of way of diversification, but I especially like simple ones, that doesn't complicate. I followed the three-bucket strategy. Personal Bucket - which is mentioned under point 4 (To take care downside). The 2nd bucket is Market Bucket- where invest in ETF or companies that could at least hedge interest. 3rd bucket is aspiration bucket - where you grow your pot thru Growth Companies like tech stocks.
Hope it helps!
Apart from STI ETF and bonds, you can consider using robo-advisors as well. Low management fees and super easy to use. Don't even need CDP account or broker. I am personally using Stashaway because it's the most popular one (iirc).
I believe Seedly has a comprehensive article comparing all the different robo-advisors!
Do some risk profiling to determine your own profile. You may not be able to stomach further risk. If that is so, just top up sti etf. If it feels too risky for you, add in some bonds. If you can stomach more risk, go learn about investing before entering into the market.