In a rapidly changing global economy, the need for Singaporeans to strategically invest their money cannot be understated.
While traditional savings are safe and practical, they often need to generate substantial returns to stay ahead of inflation.
Beyond the conventional wisdom of saving for the future, investing offers a viable pathway to wealth creation, financial security, and your unique goals.
In this article, we’ll answer some of the frequently asked questions about investing and provide simple tips to get you started on your journey.
What is the difference between saving and investing?
Saving enables you to achieve financial goals such as a short getaway or a wedding. It also helps you prepare for emergencies, like unexpected medical bills or a punctured tire. Typically, you would keep your savings in a checking account or fixed deposit account, so you can access it readily. Savings are generally low-risk, but the interest rates received are also low.
Investing, on the other hand, helps you reach long-term goals like weddings, homeownership, and retirement. There are more risks involved, as investments are generally more vulnerable to the market's whims. But by investing in financial assets, such as stocks or bonds, you might be able to grow your money passively over time. This can help you keep pace with inflation.
Why Invest in Singapore’s Current Landscape?
Singapore has an array of investment opportunities, ranging from stocks on the Singapore Exchange (SGX) to bonds, Real Estate Investment Trusts (REITs), and more. Plus, its strategic location and extensive business networks make it easy to access global markets.
With a vibrant investment landscape encompassing sectors such as fintech and startups, Singapore has many avenues for wealth accumulation.
Investing is one way for Singaporeans to counter inflation and achieve their life goals. Whether it’s homeownership, children’s education, or retirement, by making sound investment decisions, Singaporeans can pave the way for long-term financial stability and prosperity.
How much do you need to invest?
Many Singaporean brokerages allow you to start small, even with S$10 per month. This is fantastic for beginners to ease into investing.
There are two common approaches to investing: Dollar Cost Averaging and Lump Sum Investing.
Dollar-cost averaging is to invest a set amount of money regularly. This can help you balance out the effects of market ups and downs. The Monetary Authority of Singapore (MAS) recommends investing at least 10% of your income1. If you earn S$5000, you can invest S$500 every month. However, this also depends on your monthly expenses and goals.
Lump Sum Investing is to invest a large sum of money all at once. A lump sum could amount to S$10,000, S$50,000, S$200,000, or any substantial sum based on your circumstances. This might be ideal in circumstances such as a windfall, inheritance, idle funds or attractive investment opportunities. The best approach and the right amount depend on your goals and comfort level.
Investment Tips for Beginners
Set Clear Goals
Your investment should serve a purpose. Whether it will be used to finance your child's further education or your retirement, investment goals provide direction and a benchmark for your investment decisions. With a clear investment goal, you can determine the type of risk you are equipped to take. We go more in-depth in this step-by-step guide on how to set investment goals.
Build a Rainy Day Fund
Before you dive into the world of investment, it is wise to set up an emergency fund that covers 3 to 6 months of your living expenses. This financial safety net helps ensure that unexpected expenses won't derail your goals and investment plans.
Stay Informed
Stay curious and plugged into market trends, economic indicators, and regulation updates to help you navigate the market's ever-changing landscape. Knowledge is power in the dynamic world of investment. As a well-informed investor, you'll be better equipped to weather changes and seize opportunities.
So, take the time to explore educational resources from financial institutions and trusted websites to lay the groundwork for making smart choices later in life.
Start Small
Be in tune with your risk tolerance.
Start with an amount that you can comfortably contribute towards your investment portfolio regularly. Your commitment can be as small as channelling 10% of your monthly income towards your investments. As you gain experience, you can explore more opportunities and diversify your investment portfolio.
Conclusion
Singapore's vibrant financial landscape offers diverse opportunities for building your financial future.
Building your wealth with investments is a marathon, not a sprint. It involves diligence, continuous learning, and a holistic long-term view.
It is always a good idea to consult a financial advisor before making investment decisions. Financial advisors can help you create a tailored investment strategy that aligns with your unique circumstances and goals.
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