Asked on 27 Feb 2020
I've been working for a year now. Am covered with insurance. Yet to save 3-6mths for rainy days. Can i start invest every 10% of my salary? 20% in savings? So i can invest while saving for marriage, housing etc. I understand about creating CDP and brokerage accs. Do i even bother starting to invest with such little capital? or should i just buy as many stocks as i can for dividends? - and repeating.
Congratulation on realizing the power of compound interest. Do not rush to invest.
what you have? capital, insurance, savings, salary, CPF
what is your monthly spending? debt, expenses,etc
your risk profile
your investment goal: e.g your marriage, your housing etc
I would like to correct you that both saving and investing are a mean to your goal
After knowing yourself, where to get started?
It is okay to start small. The most important thing is investing for a long time so that your capital will be compounded. The key factor is time
Diversified to spread your risk across all assets class, countries and sectors/markets
Roboadvisors are a great way to start investing, with low capital and be diversified. Dollar cost average your roboadvisors and let the robo runs itself
At the meantime, learn more about investment, choosing the right assets class to meet your goals.
Clear up the myth of JUST BUYING AS MANY STOCKS AS I CAN FOR DIVIDENDS: you are giving yourself the fastest way to hell. Read about the hyflux, m1 and starhubs saga. Investment is not as easy as it seems. But it can be easy when you have the right technique and knowledge. E.g Do you just eat anything that is in front of you?
In conclusion, realising the wonder of compound interest / the need to invest is just the first but important step. Your next hurdle is doing it right. Haste makes waste. I believe this phrase resonates with most seasonal investors.
You have a great heart! I do think investing 10% of your salary is a good start, but do research on what you should invest in. It's not so much how little you start, because investments are all about dollar cost averaging, buying less units when the funds are higher priced and buying more units when the funds are priced lower, so you could try it and see how it goes for you, but for investments, they are usually mid to long term in nature, so ideally abt 10-15 years ideally. Though take note that investments do come with risks as well, which you should be able to stay strong when things don't look good for the short term.
For savings, what are you looking at? If you are looking at compounding of interest, you could consider getting a savings policy as a savings policy has a yearly bonus element, and also if you do choose to continue saving with the insurer, they will usually give a higher interest rate, which compounds yearly. So you could consider looking into that too.
2 more comments
27 Feb 2020
Before your start investing, it will always be helpful to go back to the basics - understand your cashflow. Here is some basic information: https://www.blog.pzl.sg/understanding-your-personal-cash-flow/
Getting the Right Insurance to protect the Downsides
Next, ensure that you are properly insured especially in terms of healthcare insurance. While we chase after our financial goals, do not forget the engine of this race - which is you! Thereupon, ensure that you are adequately covered in case of any health changes. Everyone wants to be healthy, but life is unpredictable.
Since you already have insurance, one of the most important things to do is to have a complete understanding of your existing insurance portfolio. Through this process, it allows us to understand the coverage that we have, any financial gap, as well as to find out whether we are overpaying for our insurance policies. I have highlighted the rest of the reasons here: https://www.blog.pzl.sg/why-every-client-needs-an-insurance-policy-summary/
Boost Your Rainy Day Funds ASAP
Thereafter, keep what you need in the bank, which is usually about 3 to 6 months your monthly expenses (as explained in the link above on understanding your cash flow). For the money that you can 'afford to lose', this money can be invested. This is simply because investment returns are non-guaranteed.
In order to have sufficient rainy day funds in the shortest time possible, create a budget to help you. The best way to do this is via automation and this is how I do mine: https://www.blog.pzl.sg/how-to-create-a-monthly-budget/
Yes, you can start investing 10% of your salary every month. If you have read my post on undertanding your cashflow (link above), you should save and invest 20% to 30% of your money every month.
Furthermore, about 5% to 10% should be for the long-term future, i.e. retirement. This is to allow sufficient time for compound interest to do its wonder.
With a small capital, you may decide whether to invest a lump sum or to enter the market on a regular basis via dollar cost averaging. Here is a comparison between the two: https://www.blog.pzl.sg/dollar-cost-averaging-singapore-does-it-really-work/
Instead of buying as many stocks as you can, I will suggest for you to slow down and spend quality time to invest in yourself first. Do proper research and write down how this stock helps you to achieve your investment objective.
On the whole, you should split your money across different asset classes through different instruments to have a well-diversified portfolio. Furthermore, having a defined goal with a proper number helps to keep yourself in check.
When in doubt, speak with a professional who is experienced and capable enough to guide you through the process.
Here is everything about me and what I do best.
Congrats on thinking about taking the first step for your financial wellbeing!
However, do not rush into investments so quickly just because it seems like the right thing to do. Firstly, settle your emergency savings first in the event of unforeseen circumstances, then make sure you cover your gaps in insurance before you start with investments. Make sure the money for investments are not money needed for the next 3 years (I.e you should not be afraid to lose this amount in the event of a downturn)
You can always start by read more about the different methods of investments, what are the pros and cons and see which ones suits your personality. You can always dip your feet by trying out robos. Try not to do stock picking if you do not uds the fundamentals of it just because of hearsay/peer influence.
All the best in your journey!
The % you could invest depends clearly on your total pay minus regular expenses.
it could help to put on pay day away a specified percentage of the pay (you can experiment a while), for the rest calculate a realistic budget (you could start with a 3 - 6 month
information collection period to know better how much you spend on average),
and then spend your expenses wisely and do never go into debt.