Asked on 24 Jan 2019
I am a 29-year-old lady. Not a invest savvy on my own and have a full-time job. So I depend a lot on POEMS Share Builder Plan started since 2015 till now, back then I invested $600 monthly (3 counters) and slowly increase the amount to $1000 monthly (6 counters). The reason why I choose SPB is because it can reinvest my dividend. However, they do charge 1% on my dividend for reinvest. I am thinking whether I should stop subscribing SPB and invest on my own. What should I do?
Christopher Tan, Executive Director at MoneyOwl Private limited
Answered on 26 Jan 2019
Dear anonymous, thanks for sharing about your investments and also for your question. Sorry for the late reply.
Firstly, allow me to say that if you are not investment savvy, you should avoid owning individual stocks. In fact, even if you are investment savvy, holding on to just a few stocks might not be a good idea because you are taking on too much risks by concentrating your portfolio on just a few stocks. Personally, I do not own any individual stocks because I have no time to study and follow them and I also want to divesify my money across more stocks. I would suggest that you either invest in a portfolio of low cost ETFs (that tracks the index) or low cost funds such as Dimensional Funds. Low cost = less than 0.5% p.a. in terms of management fee.
As a start, here are a list of equities ETF you can consider:
SPDR S&P500 ETF - US, a proxy to develop markets
SPDR Straits Times Index ETF - Singapore market
Db x-trackers MSCI Pacific Ex Japan UCITS ETF - A proxy to Asia
By investing in then, you will be broadly diversified across different geographical regions. There are enough studies to show that it is very difficult to beat the market by trading and there is really no need to. The driver of returns for stocks is earnings or profitability. As long as world population continues to grow (and it is!) and people have needs and companies continue to exist to meet the needs, stock prices will (and have) gone up over the long run. Yes, some companies will fail but most will continue to be around. That is why you should invest in a broad diversified portfolio.So stay invested. Do not get in and out based on views or news. That will be gambling.
Ok, hope this helps.
I also have the same idea as you (not invest savvy -lesser now- and have a full-time job), so I took up the Share Builder Plan then. I invested $600 monthly (2 counters - Singtel & STI ETF) since 2017.
And then I attended Dr. Wealth ERM course in Oct 2019. It was then I realised that this investment vehicle has very high beta (it's highly volatile, in relation to the overall market), as compared to the one I eventually built after attending the class. Currently, the beta stands at 0.94 (SBP) vs. 0.46 (a portfolio of 14 REITS/Trusts).
Even with 6 counters, I'd think your portfolio beta would be quite high. Generally, we'd want to have 10-30 stocks in a portfolio, to cushion the volatility.
In my situation, I plan to exit SBP when the market recovers in 1-2 years and self-manage this money.
Besides what Christopher suggests i.e. ETFs, you can consider buying into dividend-providing funds through these platforms (e.g. Phillips FAME, FSMOne) if you don't want to study and buy individual stocks. My financial advisor (on retainer) does this for me.
Going forward, if you want to invest on your own after taking into all our comments, or you simply want to see whether investing on your own will suit your profile,
I'd suggest to go for paid investment courses via reputable means e.g. Dr Wealth, The Fifth Person etc. It will cut short the time needed to accumulate your knowledge in investment, and learn from the instructors, who are investors themselves.
Although these will not be cheap, at least this knowledge is something that will be with you for life.
Hope this helps in facilitating your decision-making. All the best in your investment journey.
Hi there. Also another fellow POEMS SBF user thou I still do my own Investment. I would suggest keeping the SBF as it kind of "force" you to do some saving/investing.
Making use of the monthly investment, you are able to average out your Investments and have a better return. Mine was doing not bad until recent sell down 😂😂😂
Honestly, holding a day job and trying to find stocks to buy is abit time Consuming. So I think will be better to keep the SBF.
Well, First of all, I must say you are dealing your money very smartly considering you are just 29 and have a full-time job.
Coming to the main point,
If you are doing trading even if with the help of ShareBuilder, I guess you are doing your own research little bit about stock trading. If I am getting your right then in coming future you might increase your amount from $1000 that means your investment will increase that means your dividend payment will increase and that will lead to more fee of reinvestment of dividend.
See, there are many people who are do trading with 9 to 5 job. I am telling you a few of the lesson that learned from my experience.
Find a trading style that can suit you. You can try swing trading in which you will just have to watch weekly price change and you can do trading on your weekends.
Money is waiting, I mean it literally. There are investors who do about 80% of their trading on weekends. Plan your trading strategy and make the trade on weekends.
Do not change your trading style over and over again very frequently. Because you won't be able to understand your trade.
Figure out what actually you want from trading then plan ahead.
I hope I helped, Let me know your response.