Ever wondered if there is a simpler way to get started with investing? Well, if that thought had crossed your mind, you are on the same page as us. Investing has always been rumoured to be an ‘ugly monster’ which is so difficult to handle that we should probably avoid it entirely! Yet, deep down in our hearts, we know that investing is inevitable, especially if we want to achieve financial independence early. In this guide, we share six ways you can get started with investing in a fuss-free manner.
Buying an endowment is one of the simplest ways to fulfil a myriad of purposes. An endowment is a hybrid financial product that achieves three purposes: saving, insurance and investment. The most fundamental purpose of the endowment is to provide protection in the event of death. It also helps you save for a long-term goal (e.g. downpayment for a home in five years or a family trip around the world in 10 years).
At the same time, it comes with an investment element as the savings you entrust with the insurer is being invested on your behalf. If the investments do well, the insurer will declare bonuses to policyholders (aka you) annually.
2. Singapore Savings Bond
If you are familiar with fixed deposits, then you don’t need much introduction to Singapore Savings Bonds (SSBs), which are fully backed by the Singapore Government. Unlike fixed deposits which are touted to you by bankers, nobody ever touts SSBs to you. After all, your money that is invested in SSBs does not go into the banks’ books. Instead, it goes into the Monetary Authority of Singapore (MAS) books. While SSBs are not as popular as fixed deposits, they share the same characteristics. Just like fixed deposits, SSBs also pay you interest for putting your money with the issuer (MAS in this case). Interest is being paid out every six months as long as you hold on to the SSB.
One thing that makes SSBs triumph over fixed deposits is the flexibility in withdrawing your investment. While fixed deposits penalise you for withdrawing your investment early, SSBs don’t. Wait, there’s more. The longer you hold onto an SSB, the more interest you can earn from it. In addition, you can always get your investment amount back in full with no capital losses.
The fact is that it is pretty simple to get yourself to start investing in SSB. It is easily accessible to any Singaporean or PR who possess a Central Depository Account account and have access to banking services. You can simply apply to invest in SSB through your ibanking app or the ATM. Selling them works the same way. Just submit your redemption request through your ibanking app or the ATM and you will get your money back in a month’s time.
3. Regular savings plan
Millennials are seen as some of the better savers, at least according to studies tracking human savings habits. However, there is one thing that millennials aren’t so good at — investing. Millennials are either not investing or investing too conservatively that it is doing more harm than good, according to Fidelity. Isn’t there a way to make it as easy to invest as it is to save? A regular savings plan might just be the tool that you need if you are a good saver but a poor investor.
Under normal circumstances, savings mean putting aside money either in a bank account or piggy bank. A regular savings plan does just that for you, helping you set aside some money for saving purposes. But here’s what it does differently from a typical bank account: It automatically uses that money to invest for you, such as in unit trusts or shares. Some regular savings plans invest in Exchange-Traded Funds (ETFs) while others invest in blue-chip stocks. The type of investment depends on your personal preference towards investing.
You won’t make a quick buck here, but it’s great for those who do not have the time or the patience to watch the stock market regularly.
4. Robo advisors
Not everyone is made to be an investing expert. Some of us excel in the arts while others excel in being a linguist. The fact is that everyone has something that they are good at. But maybe investing isn’t one of your strengths. But that shouldn’t stop you from starting to invest. In today’s day and age where we are all talking about artificial intelligence and how it changes our lives, we have robo advisors, in place of investment managers, to help us invest.
to invest their money. Simply put, these robo advisors use sophisticated algorithms to invest your money for you.
Robo advisors are robots running on human intelligence. They use sophisticated algorithms that take into account your financial goals, current commitments and the existing investment climate to decide what is the best investment choice you should be making at the present moment. Having a robo advisor is like having a Nobel Prize winner at your side to make your investment decisions for you. The only difficult part is that you have to sign up for an account. Some companies offering this service include StashAway and Smartly.
5. ETF investing
Mention the word investing and the first thing that comes to mind is the complexity. From doing your research on the overall market to reading the financial reports of individual companies, each step of investing is filled with a multitude of tasks to accomplish before you can finally settle on the ‘right’ stock to invest in. Most people give up in the middle of the process because there are simply too many things to do in order to be a successful investor! But what if you don’t have to go through all that work and can still turn out to be a decently successful investor?
With exchange traded fund (ETF) investing, you can. The key idea of ETF investing is to invest in a basket of stocks that represent the market. For example, when you invest in a Straits Times Index ETF, you are investing in every single stock on the STI. This gives you investment exposure to the Singapore market as a whole through a single investment. In the short run, each stock might fluctuate in value due to demand and supply dynamics. However, in the long run, the market will continue to grow in value. Through ETF investing, you do not have to worry about each individual stock’s performance — which means this reduces the risk of putting all your eggs into a single stock or a single bond. The good stocks will over compensate for the performance of the lousy stocks.
6. REIT investing
Being a landlord is the gateway to becoming financially independent. That is the conventional wisdom that most Singaporeans live by, which is largely influenced by our parents. Indeed, in a land-scarce city-state like Singapore, investing in real estate is a sure-hit. (P.S. Just look at our skyrocketing prices of public and private housing in Singapore. What more do we need to say?) So, what if there is a way for you to take real estate investing to a whole new level, literally? What if you can invest in real estate like office buildings, hotels and shopping malls?
Office buildings, hotels and shopping malls are expensive to own. But here’s a secret you probably don’t know. There are investment vehicles known as real estate investment trust (REIT), which gives you the opportunity to be partial owners of real estate. For example, if you invest in CapitaMall Trust, you are a partial owner of shopping malls such as Tampines Mall, Bugis+ and Westgate. The REIT structure makes it easy for you and me to invest in investment-worthy real estate without having to worry about the large sum needed. Each REIT is also listed on the Singapore stock exchange that can be easily bought and sold. All you need is a CDP account and a brokerage account to get started.
This article first appeared on BankBazaar.sg, a leading online marketplace in Singapore that helps consumers compare and apply for financial products such as credit cards and loans.