Asked on 02 Dec 2019
I have a sum of 5k on hand now. Where should I invest my money in? People encourages not to invest with insurance company, what's your say on this?
Hey there! Have you set up your pool of emergency funds yet? As a gauge, it should be about 6 months of your salary. I would suggest you build up your pool before considering any form of investment.
You can also start by opening bank accounts such as DBS Multiplier or Stand Chart Jumpstart to earn ~2% interest, the criteria are not that hard to meet.
Once you have that settled, you can consider some low risk investments first such as Singapore Savings Bonds or STI ETF through Regular Savings Plan from the bank account.
And the most important rule - Always invest in what you can afford to lose.
Get your 3-6 months of emergency funds first. Also your hospitalisation insurance
Once thats up, start understanding your options. But dont sit on it too long as its easy to keep postponing this when you're working and busy.
You can start with Singapore Savings bond and those high interest account.
Once you feel comfortable, can start putting some small money to equities and get used to the volatility of markets. I have friends who cant stomach a 1-2k volatility so its just something i felt should be addressed. Start small so it doesnt scare you away.
Invest in yourself. You can either use the money to buy investment books to read or go for some courses out of your comfort level. Do something different. Can choose to use the money to go for investment course to acquire skills and knowledge. If you want to know which investment course out there worth the most, it will be Growth Investing Mastery.
I do think it's better to go slow first so stick with lower risk investments first while you build your way up. Unit trusts can be considered for a start.
Hi Mui Ling,
You'll want to ensure that you understand all options available for investing as well as their pros and cons.
Given your starting capital, you will probably want to look at investing into diversified funds, these can be done with no transactional costs, and add on to your investments later. This assumes you are comfortable to take risk and can tolerate your portfolio valuation move up and down. If you are a bit concerned, split your monies into two funds, one equity, and one bond.
Consider exploring other asset classes later on for exposure, such as stocks.
I would not invest through an insurance company in general, as there can be quite a number of costs that eat into your returns, plus restrictions on early withdrawal, etc, Investments should always be accessible and available for liquidation if needed (not that you would want to liquidate a good investment)
You should be investing in a globally diversified portfolio of funds.
Diversify across asset classes, industries, and geographies.
Work with a financial advisor to set this up with you and also understand your risk profile and investment horizon for this money.
Make sure to only invest money you don't need within 3 years and after you have an emergency fund set aside.
For me I started with a ETF as well - in fact it was the Nikko AM Singapore STI ETF. Was just buying it to try out the whole investing system of Standard Chartered Brokerage at the time, but have been holding and accumulating my position for about a few years now.
I think for beginners, it is best to start out with something that is easy to understand and can allow you to generate moderate returns - essentially your broad market index trackers like the STI etf. I would say to try US S&P etfs also, but this is after you feel alittle more confident. You will be exposing yourself to currency exchange rate risk, so you'll have to factor in possible depreciations of the USD against the Sing dollar that might lower your returns! however, if the USD appreciates against the Sing dollar, you could potentially see even higher returns since USD are worth more now!
Slowly take steps to take into account more and more risk factors - you'll be a veteran filled with various experiences of ups and downs in no time if you are serious about investing!
I started out investing in ETFs through regular savings plan offered by DBS without much knowledge of investing. Another investment that I tried out is roboadvisors since i do not need to know much as the roboadvisors are the ones doing most of the investment.
If you are looking for a safer investment , SSB would be a good option since it is backed by the government.
It is good to read up about the investment that you plan to do before deciding whether to invest.
Hope this helps and all the best in your invesment journey!
I agree that you should not invest via insurance company as insurance is meant for protection and not investing. You can start with RSP or robo advisor. All these are ETF and suitable for beginners. From there you can learn along the way and see if you want to go for stock picking when you have more experience.
Hi Mui Ling, yes I would not mix my insurances with my investments since there are alot of hidden costs in the product that eats away at the returns, You are better off trying robo advisors, low cost ETFs, SSB or fixed deposits. In the meantime, do read up more about the various invesment tools and methods, know your risk profile and have your emergency fund set up first before you dive in :)
True: not with insurance companies, not with mutual fund (unit trust) company
just do it yourself, no problem at all,
some suggestions here:
Set aside emergency funds and have your insurance protection and medical plans in place first.
You need to know what sort of risk profile you are - this will determine the types of instruments suitable. You can know this by creating an account with a robo advisory like stashaway.
If your profile is more conservative, then the types of instruments will need to be risk adverse in nature. Think bonds, fixed deposit, high yielding saving accounts, structured deposits.
If balanced, a mix of something like bonds and stocks. Aggressive profile, consider stocks, etfs, robo advisories.
Robo advisories can also be used for all sorts of risk profiles and may potentially offer better returns as compared to doing it yourself especially if you are new to investing.
Avoid unit trusts (due to fees involved which are paid regardless of fund performance) and don't mix insurance with investments. Let insurance be insurance and investments be investments.
If you have never invested before, I would encourage you to look at ETFs. Robo-advisors are a good and easy way to get your hands dirty (if you google, many available on the market) and they can help you understand the investment strategy a bit better.
My advice would be, STAY AWAY FROM MANAGED FUNDS for now. This is mainly because for a smaller capital, these funds charge a high management fee and the returns wouldnt be as good. This is mainly the reason that many fund managers try and promote these funds so much.
Good luck :)
Hi Mui Ling, I'm also new to the investing game and kudos to you for having a sum of 5k! :) I think you should consider on your risk appetite - can you afford to lose this 5k? Or would you like to gain back the 5k capital and have a low interest?
5k is actually not a big sum to start with for investing, I would suggest 10k and above, so that you can afford to diversify among different investments and lower your overall risk.
If you can afford to lose this 5k, due to higher risk of default/lossess but higher interest rates:
P2P platforms (e.g. Minterest or CoAssets)
If you would like to retain your capital of 5k, but still earn interest:
Salary Crediting accounts (e.g. DBS Multiplier)
STI ETFs (either a lump sum or monthly contributions with POSB)
I would not invest with insurance company or even with banks that has a insurance component inside, as the insurance component is usually the bigger part and investment is the smaller component. So you won't get much out of ILPs for investments. Also, most ILP-policies have high premiums which you only start to see profits after the 10th year. Why insurance consultants promotes ILPs is because of the high commissions they get with people signing on. A huge chunk of the premium you pay yearly goes to their paycheck.
First start reading up on investments, understand about cashflow.
If one is too lazy consider a dollar averaging method buying only the STI ETF which is a compositon of the top 30 companies listed on the SGX for singapore
When you invest thru insurance company, you are essentially letting your insurance company become your money manager. In return for guranteed returns, policy holders had to accept a much lower return which essentially allow insurance company to have access to cheap & consistent stream of money + siphon recurring mgmt fees.
Why invest thru insurance company when you can invest directly into the insurance company? ;)
Yup, I agree to not spend the 5k on an investment linked policy with an insurance company.
Instead, I would start reading up on industries and stocks, and start allocating my capital in small amounts to test your investment appetite.
For the rest of it, I might put it into robo-advisors. I would also look to understand their investment philosophy.
For starters, I'd say you can invest with robo advisors such as StashAway. They are diversified enough, and allows you to choose your risk levels according to your risk appetite.
Would also suggest investing some time in gaining knowledge of investing!
If you want to handle your own investments as a newbie, can try roboadvisors like stashaway. I used it as a newbie myself and saw some returns, albeit slowly.
Before you start investing, it will be best to understand your objective. Here are some questions to help you:
What is your capital?
How will you want to invest your capital? E.g. lump sum or an amount on a regular basis
How long will you want to stay invested? E.g. 10 years
What is your risk appetite? E.g. How do you feel about short-term volatility?
What is your objective for investing?
The best place that you should invest is the one that you are most comfortable and confident with. Every channel has its pros and cons. Therefore, the most important notion is to accept the cons and use a few channels to complement each other.
Personally, I build my first pot of wealth through unit trusts - sold it and bought a car with it. Disclaimer: Whatever worked for me may not work for you.
Of course, read and do research on your own. When you meet with any consultant, ask them to show their portfolio to you. This ensures that they walk the talk.
At the end of the way, it is all about building your goals together and to ensure that you reach it ahead of time.
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