There are many things to invest in Singapore. Being in a first world country has left us spoilt for choices! Generally, assets ranging from property, bonds to stocks are safely guarded and we have a great social infrastructure to facilitate your investing with peace of mind. To understand what to invest in Singapore, you must first understand a few things about yourself and what you are trying to achieve in your investments.
These are some critical questions you must ask yourself first:
There are two general aims of investing, the first being income generation from your assets. The second is wealth generation.
For example, an investor interested in income generation would go for a portfolio heavy towards dividend generating companies. Conversely, an investor with wealth generation as his/her priority would build a portfolio comprising mostly of growth stocks that multiply capital.
The stock market offers excellent ways to structure your portfolio of income vs wealth generating assets!
If you have at least 400,000 to 500,000 sum in cash (considering that some of it should always be in emergency fund form), property investment would be an interesting field to look into.
If your starting capital is lower, in the tens of thousands, then looking towards bonds and the stock market would be ideal. The stock market can effectively be used for all ranges of capital with an extremely low barrier to entry.
Now this is where I will beg to differ from conventional thinking. Many people think that opting for mutual funds and staying off property and stocks means a low risk appetite.
There’s a particular quote by world renowned investor, Warren Buffett that speaks volume about the world of investing:
“Risk comes from not knowing what you are doing.”
The truth is, if you had the knowledge and skillset to invest, risk becomes more of a relative term. Today, if I did not understand how mutual funds work in comparison with investing in a stock that I am very familiar with, yes I would categorise the former as a “risky investment” in comparison with the latter.
The real question you should be asking is:
The time commitment you are willing to put in should be the real factor in determining what kind of products you go after. If you are a completely disinterested person who does not want to think or understand investment, you would probably end up with mutual funds or investment-linked insurance plans. However, do note that the performance of these products greatly varies.
If you are someone willing to take matters into your own hands and study what you place your money into, then investing can be both fun, engaging and above all, lucrative for yourself.
Property investment would always entail on site visits, doing your market research, valuation of property and deep diving into the location. Similarly, stock investing requires you to assess the business viability, potential, quality of finances and management competency for long term growth.
From experience, I think spending 1-2 evenings a week doing your homework pays off substantially for your long term wealth plans.
Choosing an asset based on your near and future cash requirements is important. This is where liquidity comes into play. Certain assets like Property can be less liquid compared with assets like Stocks and Bonds.
To buy and sell a piece of property you would need to source for a physical buyer and follow up with administrative measures to transfer the property. This may takes months to even years. For stocks, liquidation is often as simple as setting up a sell order on your computer.
Bear in mind, liquidity can play out as a double edged sword if you don’t understand what you’re investing into. For example, the untrained investor often views and equates liquidity and volatility to risk. Seeing your investment price jump up and down daily on the stock markets often scares the untrained investor into cashing out at the wrong time, leading to losses. This is why having a balanced psychology and seeing the big picture as an investor is important.
Now let’s look at the various types of investment vehicles:
A mutual fund is professionally managed pool of money, whereby shareholders in the mutual fund will have their assets allocated to stocks, bonds and other money market instruments. Typically, mutual funds are vested in many different types of securities and the fund managers will aim towards growing your capital for you.
Fund performance is typically tracked on the returns it brings to investors and depending on the fund, a variable management and performance fee is charged on your capital.
The benefit of mutual funds is also it’s disadvantage. While funds offer a large range of diversification at ease to investor, this diversification has been criticised by experienced investors to reduce your returns on your investment.
Bonds are known as fixed-income type of investments. When you “invest” in a bond, you are actually lending money to an entity who offers to pay you a fixed interest rate. This entity can be a company or government body who will then use your money for their activities.
Traditionally, investors will move between bonds and the stock market, shifting their investment in accordance to the likelihood of an economic recession. For example, in fears of an impending crash, investors will shift their money towards the bond market.
Bear in mind that the best stock investors like Warren Buffett and Sir John Templeton actually move their wealth into the stock market when others are fearful and when there are businesses being offered on a huge discount due to an economic recession, and this is what I advocate as well.
Precious metals are typically used as a hedge against the effects of inflation. While the value of cash depreciates over time with economic development, investors believe precious metals retain their intrinsic value because of rarity.
Other than investing in physical silver and gold to stash in your vault, you can also opt to invest in gold-linked stocks or Exchange Traded Funds.
Of late, cryptocurrency has been all the rage, with bubble-like states appearing over the last one year prior to a crash. To say that digital currency is a scam would be unfair. There is certain value in the block-chain technology and the secure transactions that cryptocurrency like Bitcoin provides.
However, to place all your bets into cryptocurrency would be horribly unwise. This investment vehicles is new, unproven and anything could happen to it. It could make you very wealthy or it make you bankrupt. The best way to approach this kind of investment, from my point of view, is to invest a small portion of your portfolio, an amount that you can afford to lose.
The good old property in Singapore has often been described as “sure-win” in Singapore. Bear in mind that there are many instances that property investments have burnt the unsavvy investor, typically the over leveraged ones who are forced to sell in the economic downturn.
Manage your cashflow intelligently and keep your debts in check for the property game. If you have an eye for location and see long term, there’s a good chance you can make money in property in Singapore.
Stocks is my personal favourite because the stock market is incredibly diverse, allowing you to participate in many types of investments through a regulated exchange and platform.
For example, if you want to take part in property but lack the capital, investing in Real Estate Investment Trusts (REITs) could be an option.
If you want diversity but retain control over what sectors you invest in, Exchange Traded Funds (ETFs) allow you to choose what to invest right down to sectors like bio-phamarceuticals and technology.
Incredibly versatile, the stock market offers diverse instruments including options which are incredibly powerful to the savvy investor, allowing you to create cashflow on top of dividends.
The stock market also offers an extremely low barrier to entry – you could get started within the afternoon and is extremely liquid.
With the right attitude and knowledge to investing, the true key to massive results on your investments is consistency. Consistent saving of money, consistent buying up the right assets that multiply your money will take you a long way.
Whatever investment vehicle you choose, understanding how to pick the right asset will make or break your entire life’s wealth plan. Many people who venture into investments with no prior knowledge get burnt horribly and never look back again to correct themselves. Just as you would to learn a skill in university for your profession, investing in yourself first to learn a skill in investing is critical!
To find out how to start investing in Singapore, try out our complimentary workshop that has helped many an investor turn savvy.. It provides a balanced view between income generation assets and wealth creation:
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