Investing in Singapore for Novices (2018 Update)
KEYWORD PHRASES – investing in Singapore for beginners
Investment is a term that has confused every beginner when they plan to start investing. If you’ve decided to incorporate investments in your savings plan, then there is a chance that you have bombarded your friends and family with queries on the subject. You must have also read blogs and articles, but may have failed to fully understand the concept. Investing is a huge discipline that involves various tools and techniques to boost your savings. Yes, reading and keeping abreast with the news helps. But, a thorough understanding of the subject comes with experience.
For all novices who wish to invest and succeed, we have compiled a guide that will answer all your questions on investment. This guide to investing in Singapore for beginners will enlighten you on all the factors you need to consider before you start your journey of investing.
What do you need to know before investing?
There are various factors you need to consider before you embark on your journey to invest. This includes everything from having your finances in place to understanding some basic investment concepts:
Set financial goals and understand your risk appetite
Aimless investments make no sense. If you do not know the purpose of investments, you will be unable to strategise and reap benefits. Ask yourself the reason for which you want to invest. Do you want to invest to gain financial independence? Or do you have certain commitments to fulfill? Depending on your goals and investment horizon, you will be able to estimate your risk appetite. If you are planning long-term investments, then you can gradually take risks. But, if you have commitments coming up in a few years, then you need to be on the safer side and ensure you reap maximum returns.
Know your financial circumstance
Whether you have millions of dollars or only a few thousands, you cannot allocate all the money toward investments. While savings are important, budgeting for necessities, debts, and other financial commitments is equally essential. Clearing debts should be a priority, and you should keep some funds aside for fixed expenses. Depending on your goals, you can then budget some amount for investments. To begin with set aside a fixed amount for monthly investments.
Understand the relationship between risk and reward
‘Investments are subject to market risks’ – you must have heard this several times. Markets are unpredictable and influenced by various political and economic factors. It takes years of experience to be able to predict how the markets will fare the next minute. While this is true, it is also said that to achieve something in life you have to take risks. Typically, investments with a high-risk rate give better returns, and vice versa. But, that doesn’t mean you jump on to riskier investments. Initially, you should stick to investments that match your goals and risk tolerance. Calculate and stick to the risk-reward ratio suitable to your situation.
Once you understand these basic aspects, you can begin investing. Here’s how:
Set up your brokerage and CDP account
The first thing you need to start investing is a brokerage and a Central Depository (CDP) Account. A brokerage account makes paying for investments and investing overseas convenient. All you need to do is a Google search and send an email to your preferred brokerage firm. Some people go for the banks, where they have their savings account to make things easier. Banks like DBS, UOB, OCBC, Standard Chartered, Maybank, and CIMB offer brokerage account services. Alternatively you can opt for brokerage firms or online portals like Phillips or FMSOne portal. Additionally, open a CDP account. It acts as a wallet, where you can store all the stocks you buy.
Select from investment options
Basically, we mean strategise your investments. This begins by understanding the different investment options available in the market. Typically, when you think of the term investments, the first that comes to our mind is the stock exchange. But, investment is not limited to that. There are a variety of assets and options for investments. Stocks, bonds, mutual funds, insurance, real estate, and exchange traded funds, are some options that you can choose from. Some of these options may be riskier, while others are great for those looking for safe investments. If you’re considering investing in stock markets, then analyse the company to ensure you receive considerable returns. Additionally, should also bear in mind your investment goals, risk tolerance, and financial needs when devising an investment plan.
Diversify and monitor your investment portfolio
Once you have a plan in place, you can start investing. Make sure you diversify your investments. Diversification is an important aspect of investments that act as a defence to unfortunate circumstances. You should invest your money in different assets and of different companies. Putting all your money in one place comes with a risk of losing it. But, if you spread it across different assets, you minimise your exposure to risk. Continuously monitor your portfolio to make sure you have assets that serve your purpose of investing.
So, here was a brief on investing in Singapore for beginners. Remember, investing is not the same for everyone. A strategy that suits someone else may not be apt for you. Make sure you invest with your goals and situation in mind. If needed, consult a financial advisor to help you with investments.
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