There are many types of investment in Singapore, but the main ones that deserve your attention are stocks/shares and property, mainly because they operate under-regulated environments.
Stocks and shares are really one and the same, just different terms. Stocks are mainly used in the American setting while Shares are more used in the local context.
There are distinct differences in stocks vs property that you should know about and consider before jumping in.
Liquidity of your investment is something you should pay attention to. Stocks has always offered a significant advantage over property in this aspect, because you are able to convert your asset to cash in varying amounts without much hassle – it simply takes a click of a button on your brokerage platform!
The starting capital requirements for stocks is also a lot lesser than property. While property investors often require them to take up loans to give a boost to their capital, stocks is something with a much lower barrier of entry.
Why is it that most people tend to look at property when looking at investment in Singapore? It is mostly because stocks are often seen to be volatile and have a higher perceived risk. This comes with the liquidity of stocks. Because stocks are traded at relatively high volume because of liquidity, this can cause the stock prices to move up and down on a day to day basis. Many investors perceive this to be equivalent of “high risk” because they cannot stomach this.
As someone who owns both property and stocks, I would say that volatility is a non-issue to the trained Value Investor. If anything, volatility confers great investment points to pick up great businesses when the market irrationally pushes the stock price down! Always think long term rather than be affected by the micro-fluctuations in stock prices daily.
If you are just starting out, with low capital and want a lesser commitment to learn, stocks
may just be the vehicle for you!
Step 2: Setting Up Your CDP and Brokerage Accounts
To get started on stock investing, you will need to set up CDP and Brokerage Accounts.
Your CDP Account refers to your Central Depository. You can set this up in a jiffy at the SGX Website.
To help you understand what your CDP Account does, think of it like a storage area for all the stocks that you buy off the Singapore Stock Exchange! To protect stock investors, the Government has centralised stocks owned by investors like you into the Central Depository. Stocks that you buy would not be held by the bank or your brokerage, but in a government controlled storage area called The Central Depository.
The next step would be to visit a bank and get a brokerage account up. Your brokerage account comes with an online platform for you to fund, buy and sell stocks. An example would be OCBC Securities, Philips Capital, UOB Kayhian and more.
Once this is up, you can proceed to fund your account via Wire-Transfer. You can call your brokerage for direct assistance on this. Typically, your platform comes with a broker whom you can call and ask questions.
Once that is done, you can buy your first stock and you would have started on your first investment!
Step 3: Pick the Right Strategy to Generate Consistent Profits
There are many ways to approach the stock markets to make money. Some of them work, most of them don’t, so make sure you stick with something that makes sense and is logical to you.
Arming yourself with the right knowledge is extremely important. There are several approaches to the stock market which fall under the two broad strategies of investing versus trading
. Trading, in general, is an active strategy that requires you to buy and sell stocks regularly. Trading is often done based on patterns and signals that may arise in the stock market. Investing falls back on buying good businesses that multiply and grow your wealth for you.
Although some traders may boast of generating 100s of percent in returns every month, it is careful to note that such traders may not be showing you the downside of their trading activity! So far, I have not met any respectable trader who does not acknowledge that investing can generate equally powerful or even better returns on the stock market.
Of the wealthiest stock market players in the world, most happen to be investors rather than traders. The reason is because, as the managed fund size grows, trading becomes less and less efficient.
Both trading and investing can be profitable if you play your chips right, it really depends on your temperament and time allocation.
Of the wealthiest investors in the world, most, like Warren Buffett, happen to be Value Investors, falling back on a logical strategy
that has allowed investors to multiply their wealth consistently for close to a century.
Below shows a table comparing the difference between Investing and Trading:
So, does Value Investing work with investing in Singapore?
The answer is yes. Value Investing falls back on the method of buying good quality stocks and buying them at low valuations to profit off them. This process is extremely logical and does not apply to one particular geographical region like the United States or Europe. The same methodology can be applied to investments locally.
In fact, most successful property investors fall back to the same basis of buying high quality property when the market offers them at a significant discount during trying times. This is the exact same principle that Value Investors have used to make money off the stock market for years and years, collectively creating billions of net worth over the last century.
Step 4: Avoid Traps of Investing
As you move along your investment journey, you will invariably be tempted to explore other vehicles of investment in Singapore. It is important for you to learn to recognise scams that may surface along the way.
Generally, any investment that promises consistent profits of more than 25% returns on your capital per annum should raise alarm bells as to whether you are dealing with a scam, especially if the investment operates outside the regulatory laws. The word “guaranteed returns”, especially when dealing with such high returns should most definitely worry you.
As a benchmark, the best stock investors in the world can return about 20% on their capital when their portfolio is annualised over the years. Even this return fluctuates over the years, with some years performing better than the others.
Most of the wealthiest and successful stock investors belong to a discipline called “Value Investing”, which is what Warren Buffett used to build his wealth to one of the world’s richest men, at 70 Billion dollars of net-worth. To learn some key secrets to Value Investing, you might want to join us for a complimentary live session here
Step 5: Continue to Learn and Master the Art of Investing!
Investing in Singapore is no rocket science. In fact, it’s not very difficult to find profitable stocks and it can be done with a systematic and logical approach. Best of all, this approach can be taught to you!
The key to being a profitable investor with sustainable results is to treat your learning process as an ongoing journey, supported by the right people with experience.
Value Investing College is the only programme endorsed by Mary Buffett, the New York Times bestselling author of the Buffettology series. We also have worked with renowned investors and fund managers from all over the world.
To learn the following:
- How to Pick High Growth Businesses to Multiply Your Savings
- How to Generate Cashflow While Holding on To Your Stocks With A “Rental-Like” Strategy
- How to Compound Your Portfolio to Great Degrees
- How to Distinguish Great Businesses from the Poor Ones
Join us for this complimentary workshop that has touched tens of thousands of lives worldwide: