facebookWhat is the best way to invest $25k for a beginner? - Seedly

Anonymous

13 Aug 2019

āˆ™

Retirement

What is the best way to invest $25k for a beginner?

Hi Seedly community,

I am a 27 yr old and currently looking for advice from the experts in the financial world on a good way to invest 25K. I would like to allocate them into 1: 1 ratio for the following time frames,

1) Mid term (5 to 10 years)
2) Long term (10 years+)

All inputs are welcome as I am new to investments and honestly quite reluctant to keep the cash in bank accounts with the low interest rates..

Best regards,
Liam

Discussion (25)

What are your thoughts?

Learn how to style your text

Luke Ho

Edited 26 Apr 2022

Founder and Director at CFX Money Maverick Pte Ltd

Offhand, I have no idea where you got any idea that you were going to find experts in the Financial World here. You're not. What you're really going to get is a very mixed set of comments and you're going to lean in towards what you feel makes more sense, compared to what may actually do so. The worst advice are people who tell you you should go study and acquire knowledge entirely on your own. Thats inefficient and about as valuable as the advice. Which is free. And worthless. If you really believed this or had any interest in this prior to posting your message, you'd probably have studied very differently, or already have the capacity to figure out what you want. You have a guy who doesn't think he helped people in his job and yet he was perfectly comfortable pocketing money for 10 years. That definitely seems like a good place to take ideas from, returns or otherwise. I would literally send you off to MoneyOwl even though I clearly work in conflict with them. Them, or literally any other Finanacial Advisor can give you far more specific and valuable advise than a couple of paragraphs.

Whats the purpose of the 5 -10 year timeframe? Is there a need, or is it a feeling?

How about the 10+ years? Why 10+? Why not a very specific number towards a very specific goal? And if you didn't want to share those specific goals from the beginning, why would you think that answers based on the limited parameters and information would be any good? If you're looking for an expert in the Financial World to get advice from, go to someone with a license to give that advice.

https://www.moneyowl.com.sg/

ā€‹

Vincent Tan Wen Bin

22 Jul 2019

Assistant Vice President at Thinkers Alliance

  1. Set a side your emergency fund. 6-12 months of your income.

  2. Have a short term savings those within 1-3 years time frame as you are nearing the age where you would be getting married or buying your first property soon. (50%)

  3. Mid term. 5-10 years (30%)

  4. Long term (20%)

The reason of why in this format is to take into accord that you might be buying a property when you reach the age of 30 hence a huge chunk would be in the short term component.
30% mid to 20% long term component can be left into either RSP, endowment, ILP, Annuities to earn a higher return.

View 3 replies

Jefremy Juari

17 Jul 2019

Financial Writer at Medina Books

Hi Liam,

I was a financial consultant for a decade, recommending people insurance, managed funds, endowments, etc. What i felt was that i was doing my clients an injustice. It was simply taking their monies and pocketing into the company's and mine and investing whatever is left.
Now that I've left the industry, my vision for opportunities is far wider. In the mid-term what i am doing is hedging against the currency and moving into gold, properties, masternodes and some crowdfunding causes, all with an appreciation of more than 10%. What I look for in these instruments are capital appreciation, a regular payout and a sense of control over the assets itself.
Nothing is absolutely passive, spending a little time learning and being proactive can absolutely make more for a healthier bottomline. We are at the edge of a major global economic shift where fortunes are made and lost. The one who has more knowledge trumps over those who are lacking.
There's my 2 cents. Hope it helps you in the long run.

View 11 replies

Fergus Tan

17 Jul 2019

Senior Partner at Vision Advisory Management

A lot of interesting comments here, and to be honest there are many ways to go. Some righteous ones might say, you should spend the money on educating yourself. Some say you should get your toes wet and just invest in stocks. Others who might be more risk adverse will say buy a ETF or unit trust.

They forgot. The first question should always be, what do you expect to get out of 25k?

Now based on your question, you decided to invest the money, and decided the ratio to be 1:1 for a 5-10 years time horizon, and a more than 10 years time horizon. So if I may, I would want to deep dive on why 5 to 10 years. Is there a need for the money after that, and what happens if you hit a loss after that time period?

Why I am asking is that if there is a fixed use for the money after a time period, then you should go for low risk assets so to ensure you hit your time frame.

If all you are saying is, you want to invest for the long term, and you have no specific use for the money, but you want to be able to have a pot of gold for luxury if the investment makes a profit, then the recommendations would change.

Hypothetically, if I was your age, and I would try to put myself into your mind-frame, what I would do is to try to do things that will generate intangible life lessons. Hence, I would invest a chunk into stocks directly.
This could be blue chip stocks in Singapore, in order to have vested interest and subconsciously you will learn more about them. This could also be higher risk small cap stocks, where you must understand it is a gamble. I might also even venture into US stocks. Options selling is getting popular as a way of active income. If you don't intend to take courses, then put a small amount of money just to learn about that.
What is your expectation for this? To be honest, you might generate 671% return from a single stock or option, or you could lose all the money. That's not the important thing. The key is long term consistency, and you are trying to preserve that notion while using the money to learn more.

Next, I might look at other viable investments that would take less than 10% of my capital. So I might put a small bit of money into crypto currency, IF it is something I believe will appreciate. Of course, if you think it is a scam, you should avoid.

In summary, a good 30-40% should go into a basket that is going to generate life lessons for you. Based on 25k, I might put $5-10k into bluechip types, 2-3k into options writing, and maybe 2k into crypto.

The remaining 10k, I would probably put into an investment basket. This is money that is meant for future planning such as retirement. Hence, I would put this chunk into things like ETFs, Unit Trusts, ILPs, or super bluechip stocks. My expectation would be realistic and a longer term 8-12% annual returns. Ideally, not much time and effort should go into managing this, besides top ups, ocassional switches, etc. You should not even have to read financial reports and all too often.

Reason is this. You are still fairly young. At your current age, you are going to make more in the next 5 years, than the money you saved in the last 10 years. What you want to do is to focus on increasing your earning potential. This could be focusing on your job (and climbing the ladder), or taking courses to build a side hustle.
In the grand scheme of things, you could lose the 25k, and it will just be a drop in your life's ocean. Hence, you should use the money to learn things through experiences.

Honestly, 25k, even if you miraculously did better than all the fund managers in the world and hit 30% annual return, it's only $7,500 and if you are a high earner, you might spend that on a business class ticket when you have a wife and 2 kids anyway.

Of course, keeping cash in the bank and doing fixed deposits is the worse. Even buying Singapore Savings Bonds teaches you more life lessons.

TL:DR: Spread your assets across different RISK classes, and use those as opportunity to be better in investment in the next 10 years.
PS: Please don't invest shitloads into crypto mining or other get rich quick investments that promises 25% per annum, or some ridiculous monthly ROI.

Hariz Arthur Maloy

17 Jul 2019

Independent Financial Advisor at Promiseland Independent

Hi Liam.

For any monies required in 5 to 10 years, I'd go for a conservative portfolio of around 3...

Write your thoughts