You should pay attention to two key facts.
First, Singapore’s population is rapidly aging. According to Statista, one in three people will be 65 or older by 2035, compared to one in four. An aging society may deplete resources more quickly, leaving fewer resources for retirees.
Second, a Singaporean saves approximately one dollar for every three dollars earned in 2023, providing a cushion for unexpected expenses. Therefore, you should start investing now, whether for emergencies, retirement, or other goals.
In this blog post, you’ll discover the basics of investing, explore different types of investments, and learn how to get started with your first $100.
Why Should You Invest?
Investing offers several compelling reasons that make it an essential financial strategy. First and foremost, it helps you achieve financial goals, such as owning your dream home, saving for a comfortable retirement, or funding your children’s education. Wise investing can accelerate your savings through the returns generated on your assets.
Additionally, investing is crucial to beating inflation. As prices for goods and services rise, the value of your assets can diminish, eroding your purchasing power. Investing helps counter these rising costs by increasing your asset value over time.
Moreover, investing can generate a steady income. Assets like preferred stocks, common stocks, and bonds pay regular dividends or interest, providing retirees and those out of employment with a reliable income stream to supplement their other sources of income. Finally, investing is a proven way to build wealth.
Over the years, individuals like Warren Buffett have created substantial wealth through consistent, long-term stock investing. His investments in companies like Coca-Cola and American Express have yielded returns far exceeding the original investments over decades, demonstrating the power of investing in building a financial empire.
The Importance of Starting Early
One powerful investment tool is compound interest. Reinvesting dividends or interest from your investment can create an exponential effect of return on your wealth.
For example, if you invest $10,000 at an 8% annual return with re-invested dividends or interest, the total value will grow to $46,609.57 in 20 years. However, if you refrain from withdrawing the funds and keep the investing period for 5 more years, the investment can grow to $68,484.75, an additional $21,875.18, or an almost extra 60% in return.
You should take advantage of the compounding effect by starting today to gain more benefits in the future.
Top 6 Investment Options in Singapore
| Investments | Risk tolerance level | Where to invest |
| Stocks | High |
|
| Singapore Savings Bonds(SSBs) | Low | Apply through ATMs from UOB, DBS/POS, UOB, or OCBC’s marble application |
| ETFs | Low-to-Medium |
|
| REITs | Low-to-medium |
|
| Forex and Commodities | High |
|
| Robo-Advisors | Low-to-medium | Open an account with an online brokerage |
Singapore offers a robust regulatory framework catering to diverse investment products, attracting international investment flows into the leading financial center in the Asia Pacific Region. The popular investment vehicles consist of:
1. Stocks – Best for Aggressive Investors
Risk: High to very High
The Singapore Stock Exchange offers securities services to local and international markets. Investors can also invest in overseas stock markets through stock brokerages, such as the New York Stock Exchange, Nasdaq, London Stock Exchange, and Tokyo Stock Exchange. International investing diversifies the risk of loss in one single market.
To receive dividends, you must open a CDP(Central Data Processing) account before applying for an investment account with a brokerage and linking it to the CDP account.
2. Singapore Savings Bonds(SSB) – Best for Low-risk Investors preferring income streams
Risk: Low
Singapore Savings Bonds, a popular and low-risk investment tool issued by government agencies, offer stable and regular income streams and many benefits, such as taxes and low fees favorable to conservative investors. Besides, investors can withdraw the funds anytime. Individual investors can buy a maximum of S$200,000, though the bonds are not transferable.
To buy an SSB, you must apply through banks’ ATMs, such as DBS/POS, UOB, or OCBC’s marble application.
3. ETFs – Best for High-risk Investors
Risk: Low-to-medium
An ETF is a popular investment trust that tracks major indexes like the Strait Times Index or worldwide investment indexes. It offers passive investors an alternative to traditional investments like active funds, stocks, or bonds. Its low-cost features attract beginners and investors with a hassle-free style. Popular ETFs include the SPDR Strait Times Index ETF(ES3), Nikko Singapore STI ETF(G3B), and ABF Singapore Bond Index Fund(A35).
Investors can open an account with a brokerage or bank to begin trading ETFs on the Singapore Stock Exchange.
4. REITs – Best for Medium to Low Investors
Risk: Low-to-medium
Investors can purchase the popular REIT shares listed on the Singapore Stock Exchange. A REIT collects rent from tenants and provides stable income to shareholders. A qualified REIT also offers tax advantages to investors. Popular REITs in Singapore include names like Capital Integrated Commercial Trust(C38U), Ascot Residence Trust(HMN), and Mapletree Logistics Trust(M44U).
You can trade ETF shares through the Singapore Stock Exchange by opening an account with a registered brokerage online or from a brick-and-mortar store.
5. Forex trading and commodities
Risk: High
Investors have more investment options, including high-risk activities such as trading foreign currencies and commodities such as gold, silver, platinum, and other precious metals. These involve high risks, and inexperienced investors are prone to capital loss. Therefore, investors should learn the investment technique beforehand.
6. Robo-Advisors
Risk: Low-to-medium
With advanced technology, Robo-Advisors‘ rise has become a famous avenue for young and small-sum investors to accumulate wealth. Most Advisors do not set minimum investment requirements and offer multiple investment tools, such as unit trusts and investment portfolios, so investors can set their targets with budgets that suit their needs.
How to Start Investing with S$100
Thanks to Singapore’s finance hub and the robust investment industry, you have more options starting at $100. The following are some popular choices for investors:
Robo-Advisors
With advanced technology, Robo-Advisors’ rise has become a famous avenue for young and small-sum investors to accumulate wealth. Most Advisors do not set minimum investment requirements and offer multiple investment tools, such as unit trusts and investment portfolios, so investors can set their targets with budgets that suit their needs.
Popular Robo-Advisors include StashAway, Syfe, and SquirellSave. You can create an account with these investment brokerages online.
Regular savings plans
In addition to traditional businesses, banks like POSB and OCBC in Singapore offer customers regular savings plans. Investors can begin saving with a small amount, as low as $50. Other financial institutions, such as FSMOne RSP, also offer regular savings plans to their clients for small-sum investing.
DBS/POS, OCBC, UOB, and OCBC offer popular regular savings plans to investors who are starting their investing journey.
ETFs
Exchange-traded funds offer another alternative to investors, starting with a small sum. Nikko AM Singapore STI ETF allows investors with a minimum amount to invest in blue-chip stocks tracked by the Strait Times Index, making stock investing more accessible to beginners.
You can begin trading the ETF shares on the Singapore Stock Exchange by opening an account with a bank or brokerage.
Before starting, you can refer to the table above for more information. Also, remember to conduct a financial analysis to decide which investment tools suit you.
Where to Invest Your First $5,000
If you have more cash to start investing, more options are available for allocating your assets in your portfolio. Besides the avenues available mentioned above, you can choose the following:
Singapore Savings Bonds(SSBs)
The government-backed bond investment, which has a minimum amount of S$500, provides investors with stable and regular income streams and the safety of capital.
Investors should buy through banks, such as ATMs of OCBC, DBS/POS, and UOB for applications.
Stocks
Investors can invest in stocks listed on stock exchanges, which offer them direct ownership of companies and benefits like voting and stock splits.
Stock brokerages and banks are popular places for investors to trade stocks. Today, account opening procedures are simpler and more convenient for placing orders online.
Forex trading and commodities
Investors can open an account with a registered brokerage or bank to begin trades.
The above are some investment options available to investors with $5,000 or above. Investors can refer to the table above for more information and should review their financial situations by assessing a financial analysis before investing.
Step-by-Step Guide to Investing
This step-by-step guide will help you set financial goals, assess your risk tolerance, choose an investment strategy, and select the best platform to confidently begin your investing journey.
1. Set your financial goals
Before taking further action, you should have a clear objective of why you should invest. Financial goals, such as retirement, education, home purchase, travel, or emergency fund, can become impetus for your action plan. Besides, you should prioritize, quantify your goals, and set up a horizon for more than two objectives for smooth implementation.
2. Assess your risk tolerance
Understand that higher returns usually come with higher risks. Consider risks like inflation, market volatility, and interest rate changes, which can affect your investments. Assess your finances to decide if you should take on more or less risk, and consider how your investment timeline impacts your risk tolerance.
Financial questionnaires can help you identify if you’re more cautious or willing to take on more risk.
3. Choose your investment strategy
Decide between active investing, where you manage your investments, and passive investing, where professionals do it for you. Your choice should depend on your investment knowledge and the time you can dedicate to it.
Consider dollar-cost averaging, a strategy where you invest a fixed amount regularly, helping you build your portfolio gradually and reduce the impact of market fluctuations. This approach works well in a long-term rising market but requires thorough planning.
4. Select an investment platform
In Singapore’s competitive market, there are many investment platforms to choose from. Seek advice from friends and financial consultants to help identify the best options. When selecting a platform, consider its features, user experience, fees, minimum investment requirements, and customer support. Testing the platform and evaluating these factors will help you make an informed decision.
5. Start Investing
To make your first investment, start by defining your financial goals, determining your risk tolerance, and selecting a suitable platform. Begin with a small investment and assess the outcome. Regularly monitor and evaluate your investments. If the results are positive, continue your strategy; if not, consider revisiting and adjusting your approach.
Common Mistakes to Avoid
Harry Markowitz, Nobel Laureate in Economics, once said, “Diversification is the only free lunch in investing.” It highlights the importance of smart strategies in the world of investing. However, many investors make common mistakes that can undermine their success. From not setting clear goals to ignoring the importance of diversification, these errors can lead to significant setbacks.
1. Not setting clear goals
An investment with clear goals is like driving without knowing your destination. You may not know what to invest in or whether you will succeed in reaching your target. Therefore, setting clear objectives is the first step toward success.
2. Lack of diversification
Over-concentration poses the greatest market risk and exposes one to sudden market downfalls or investment fallouts. Well-diversifying portfolios protect one from avoidable issues and increase asset value at the same time.
3. Emotional investing
Over-emphasis on your favorable investment tools can subject you to unnecessary risks arising from it. A well-planned investment plan involves rational and objective deliberations over appropriate investment tools and others contributing to its success.
4. Ignoring fees and charges
Investment charges erase your hard-earned return and even capital over time. You should compare and use the features offered by a platform to maximize returns, minimize costs, and enhance portfolio performance.
Final Word
Investing is a journey that demands ongoing learning and thoughtful planning, regardless of whether you’re a seasoned professional or just starting. The key to successful investing lies in developing a well-structured plan that aligns with your financial goals and risk tolerance. It’s essential to remain disciplined and stick to your plan, even when market conditions fluctuate.
Key Takeaways:
- Robo-advisors, regular savings plans, and ETFs are popular investment options for beginners
- Banks and online brokerages are popular places for opening accounts and trading.
- They should conduct financial analysis to determine their risk tolerance and investment horizons and find suitable investment tools.
Loan Advisor is a top loan comparison site that offers you the opportunity to request loan quotes and compare options from the best licensed moneylenders in Singapore—all with no obligation to apply. Get started today and find the perfect loan plan for your needs!
