Starting an Investment In Singapore 2018 – Where to Begin and The Different Types Of Investments Available (A Guide for Complete Beginners)

If you have a stable source of income, that’s great. If you’re able to save a portion of your income, that’s even better. However, is leaving all your savings in the bank really the best option?

We all want to grow our money. You would probably have heard of investments from your friends, relatives and family. Some of them might say that investments are great while some advise you to never dabble in them. Nonetheless, investing (when done successfully) can definitely help increase your wealth. Good investment choices can easily help you line your nest and ensure a comfortable retirement. However, you can only do this by gaining a good understanding of what investing is all about. It is definitely not wise to invest in things that you are unclear of or unfamiliar with.

Well, if you are reading this article, you are probably planning to make an investment soon or is simply curious about what they are. So with all that said about investments, what are the common forms of investments in Singapore? What are they all about?

 

What can you invest in? What are the different forms of investments? 

People who don’t understand what investment is all about will compare it to gambling. Well, there are risks and the chance that you will lose your hard-earned money. However, smart investors will tell you that applying a strategic approach to investing can help you build substantial wealth from your investments.

If you’re just starting out in investing or looking to invest in the near future, it is wiser to put your money in some of the more common investments. These include:

1. Stocks

These are a good buy if you want to minimize risks and still get good returns on your investment. They are also an easier investment for a beginner.

To buy stocks, you need to only walk into a brokerage and open an account with them. Common brokerages are Phillip Securities (POEMS), Standard Chartered, Maybank Kim Eng, OCBC Securities and more. They are usually a great help in your investment process. You can then go through the list of stocks that are available on the Singapore Exchange (SGX) and choose what you want to buy.

The price listed on the stock exchange is that of a single share. Singapore shares are typically sold in lots with 100 shares each. Therefore, if you want to buy a stock that has shares going for $2 per share, you may opt to buy 20 lots at a total cost of $4000.

Picking the stock to purchase can be a challenge for a beginner with all the numbers and data. A good rule of thumb is to start by purchasing stocks in an industry you are interested in or knowledgeable about. Also, try not to dump in all of your investment funds in your first attempt. If this proves to be too daunting, you can opt to buy into an Exchange-traded fund (ETF).

2. Exchange-traded funds (ETFs)

If you’re looking for diversification while investing in stocks, but don’t want to do the actual picking of stocks, you can opt for Exchange-traded funds (ETFs). These are mutual funds that track the Straits Times Index.

The Straits Times Index consists of 30 of the biggest and best companies in Singapore. They represent various sectors in the market and account for more than 77% of the SGX total value. Because of the sheer value that these companies’ stocks represent in the SGX, the average returns from these companies are preferable to the market returns.

3. Real Estate Investment Trusts (REITs)

With property prices soaring, it is not surprising that many Singaporeans are investing in property. REITs give you the opportunity to invest in the real estate industry without buying a property.

REITs are listed real estate companies that you can invest in. Just like with the SGX, you purchase shares in the companies. However, unlike other listed companies, the money you use to invest in REITs is used to purchase, manage and operate properties.

If you choose this option, you can choose to invest in any of the 35 companies currently listed. These companies cover various sectors including office, industrial, retail, healthcare and hospitality. When you invest in a particular REIT, you will be investing in the properties that they manage. You therefore essentially become a part-owner.

4. Bonds

This is one of the safest investments you can make. However, they are not without risk. They represent a debt obligation that organizations issue. These organizations are essentially borrowing money with the promise to repay it with interest. The repayment is done throughout the lifetime of the bond.

Each bond has a different maturity period. Some bonds can mature in one year, while others can take as long as 30 years to mature. Short maturity periods are best for those looking for less risk since interest rates won’t fluctuate so much in a short period.

5. Peer-to-peer lending (P2P)

Peer-to-peer lending provides a platform through which individual investors can pool their money and small businesses can borrow. Small businesses that may not be able to access money from traditional financing are able to access the money they need. For example, many startups in Singapore are unable to attain business loans from banks as they are young and usually lack the resources to convince the financial institutions. With P2P lending, individual investors benefit from the interest paid by the businesses.

The investment amounts are flexible, and minimum investments are usually about $1000. You can expect an annual interest of between 15 and 25% on your investment.

6. Gold

Good old solid gold. Now, investing in gold doesn’t mean that you walk around hanging the uncle gold chain on your neck or cover your hands and fingers with gold jewelry.

There are different forms of investment for gold and gold, is really a great form of investment for diversification. There are a number of ways that you can invest.

1. Physical gold. Buy actual gold jewelry, coins or bars.
2. Purchase gold certificates. With these certificates, you don’t have to lunge all the gold home, but you can redeem these papers for for cash or physical gold at any time.
3. Buy gold related ETFs. It works the same as the above point of ETFs, and you do not need to handle physical gold.
4. Trade gold on futures, options and forex markets. This works well if you do not plan to hold onto gold for a long period of time. However, as this form of trading requires a lot of attention and is riskier with a volatile market, new traders are not advised to try this.

 

Tips for investing your money – Before you jump in with your hard-earned money 

1. Have a financial plan

As the old saying goes, “if you fail to plan, you plan to fail”. As cheesy as it sounds, it is true. It is extremely important to have some sort of plan before you make your first investment. This plan will help to guide your investments based on your current needs and aspirations for the future. Following your financial plan will help you reach your financial goals. For example, a basic financial plan can include your purpose for investing, how much you intend to invest, how much risk are you willing to take and the duration or time frame.

Your financial plan will outline how much you can spare for investments. It will guide you on the risks you can take with the investments to grow wealth.

2. Open a Central Depository account

A Central Depository (CDP) account is necessary for investing in stocks. It is an account that provides integrated clearing, settlements and deposit functions for people in the Singapore securities market. This account will be used to oversee all your shares. The Monetary Authority of Singapore (MAS) regulates these accounts. You can therefore be sure that they are safe from fraud.

You only need to fill and submit an application form, or visit a brokerage firm to help you with the application.

3. Start investing even if it’s just a small amount

You don’t have to start with large investments. If you keep waiting thinking that you will only start after you have saved many thousands of dollars, you probably never will.

Start small. You can start investing with small amounts of money and allow your money to earn interest over time. The point is to start as early as possible. This will give you enough time to actually get a good return from your investment. This is especially true if you’re a millennial.

4. Diversify

Don’t put all your eggs in one basket. Add diversity to your investment portfolio by investing in different types of investments. You can invest in different companies on the Singapore Exchange or choose a different type of investment e.g. bonds, gold or ETFs.

5. Be aggressive

Investing can be scary. However, if you’re not aggressive about your investments, you will not increase your wealth. Contrary to popular belief, young investors aren’t always aggressive.

Aggressive investments often have good returns. You should thus consider investing some of your money in more risky ventures to take advantage of this.

6. Get instant investing advice from algorithm trading bots

With technology today, you don’t have to pay a traditional financial advisor to get advice on what investments to make. You can get advice from robo-advisor. They function just as the traditional financial advisors do. They will ask you questions and determine your current financial profile. They then use algorithms to determine the best investment portfolio for you.

7. Join a community

Joining a community is probably one of the smartest and best moves when doing investment. You don’t have to travel the road of investing alone. Trust me, you can learn a lot by talking to other people.

There are several online and offline communities that you can join to help you make better investment decisions. There are always people who are willing to share their experience or expertise. Better yet, if there are news about the investment markets, you can bet that this group of investors will be the first to talk about it!

Just a quick note that with the massive flow of information, it will probably be wise to cross-check the data and news with other resources as well.

Well, if all else fails or if you really have no clue on what to invest in, you can simply copy the investment strategies of other successful investors. This is actually what most people do. It’s simply using the beaten path. Good luck!

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