Anonymous
Just looking my cash savings now. After setting aside 6 months worth of current monthly salary, I have slightly over $15k and I would like to invest (low to mid risks) instead of hoping for higher salary to e.g. beat inflation, being able to travel on budget $5k-$7k annually, lead a decent lifestyle after marriage (no need maid but once a week pay for professional cleaner), prepare for parents’ retirement soon etc..
Any suggestions?
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Daniel Lee (CFP®)
30 Jun 2019
Independent Wealth Management Consultant at Promiseland Independent Pte Ltd
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Depends on your risk appetite and financial knowledge to be honest.
Some very low risk folks go for SSBs.
Some with little to no knowledge would probably buy unit trusts, index funds, or some insurance type product.
I've "played" around quite a bit, and so I will share my views:
in the grander scheme of your goals, its not going to be SSBs of 1-2+%.
if you are very novice and think "professional advice" is better, then you may consider unit trusts etc or products from insurance cos.
The downside of products from insurance related always go for the long run and commitment, and can be depressing because you pay for insurance costs and they dont break even for many many years. Sometimes the returns arent that great either. But they are supposed to be "safer" and "reliable".
For unit trusts, the problem with "professional mgmt" is high annual management fees, and sales / platform charges. I think there was a study that showed every 0.1% of fees brings down the 10 yr return by 2%.
if not very experienced, and still want to avoid fees, go for index funds and dollar cost averaging. Because the index will only contain those that have large market cap, and meet certain criteria, its like an average of the cream of the crop of the index.
if you feel up for a challenge, then try those regular savings plan via the banks or poems. You sign up for a monthly amount, and the bank acts as a custodian and buys for you on a fixed day of each mth. You can pick a stock from their menu, some have many eg maybank / poems, ocbc only has 19 including an index fund.
I have a bit of savings allocated here. What I do is monthly contribution of 500 (default option) under ocbc bcip and buy only one stock with the best dividend yield and financials (i do homework). If the dividend yield goes above 5+%, I increase the monthly contributio. If it drops below 4%, I look for alternative to change, or stop the plan.
The beauty here is you can go long and slow with small amounts and adjust according to your risk appetite (though I dont recommend too small, $5 charge on $100 contribution = 5% costs. I go with 500 coz it will bring cost % to slightly above 1%)
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If you're looking for low-medium risk, then some possibilities could be ++blue chip stocks, ETFs, RE...
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Hold it right there.
I think it will be best for you to quantify your short-term plans first - marriage, HDB downpayment and renovation cost - and see if you actually have the cashflow to invest for the mid-long term horizon.
The reason why people fail to make money off the market is not because they don't know what to invest but that they fail to plan and strategize accordingly to their short term cashflow needs.
As a result, they end up having to "force sell" their investment just to get the cash needed for their marriage and renovation. This ends up disrupting the entire investment strategy and you are at the mercy of market sentiment when you are forced to sell.
So go and figure out how much you will need for your property and marriage, when you need it, and how to finance for it (usually I ask my clients to finance it via pure cash savings in SSB or mutliplier accoutns).
Invest only if you have a good 8 years + investment period, your short term needs are provided for by your CASH savings and most importantly if you have an investment strategy in mind that will provide you with the returns you need.