Singapore is a great place to live, study, work, and retire. It has a high quality of living, low crime rates, and a stable economy.
But if you’re looking to invest in Singapore – as a beginner or a student – you might be wondering where to begin. There are many different investment opportunities available in Singapore, from stocks to property to even cryptocurrency!
In this article, we’ll go over the basics of investing in Singapore, including what types of investments are available, how to choose the right ones, and how to get started with investing in Singapore.
Here are 17 steps you need to take to start investing in Singapore as a student or beginner
- Invest in yourself
- Invest in finance knowledge
- Have an emergency fund
- Pay off your debt
- Get insured
- Make sure you have money left over every month
- Understand the different types of investments available
- Know your risk appetite
- Know your time horizon
- Know your investment goals
- Know how much you can afford to invest
- Decide on a portfolio allocation
- Find an investment platform for you
- Get financial advice
- Purchase your first investment
- Fine-tune your investments
- Be patient!
Before we get started, what is investing?
In its simplest terms, investing is when you put money into something that will increase in value or generate income over time.
There are many different types of investments, including stocks, bonds, unit trusts, real estate, commodities (such as gold), and others. Each type of investment has its own advantages and disadvantages.
Is investing and trading the same?
Investing is a long-term strategy where you purchase shares of stock in companies that you believe will grow over time. Trading is short-term speculation where you try to profit from price movements in stocks.
Both strategies require patience, discipline, and knowledge. Investing requires a lot of research, whereas trading requires quick thinking and fast execution.
It’s important to know the difference between investing and trading – of which investing is the key focus of this post.
Now that you know what investing is, let’s get back to the topic of how you can start investing as a student or a beginner!
Invest in yourself
If you’re going to invest in yourself, you need to be smart about where you put your money. Investing in yourself means that you should spend your money wisely, not waste it on things that aren’t important.
That’s why you should invest in yourself by learning skills that will help you achieve financial independence. These include saving money, budgeting, education, and work skills.
Saving money is a great way to build wealth because it helps you avoid debt. Saving money also gives you the freedom to invest in other areas of your life, including your career, relationships, health, and hobbies.
Budgeting is another skill that will help you save money and invest in yourself. Budgeting teaches you how to track your expenses, set aside money for savings, and pay off debts.
You should also look to pick up other skills relevant to your personal life and work.
Remember, before you can start investing, you’ll need to have the money to invest. And to have money to invest, you’ll need to develop yourself so that you can progress in your careers.
This could be furthering your education, learning new skills, or improving on skills you currently have.
Don’t forget that you should also have a work-life balance. There’s no point hustling your life away for your careers and investments when you don’t enjoy the process of building wealth.
Invest in finance knowledge
If you’re going to invest in any asset, you should learn as much as possible about it. Investing is no different.
Start by learning about the basics of investing. Learn about stocks, bonds, mutual funds, ETFs, and other investment vehicles. Then learn about the types of investments available to you, including real estate, private equity, cryptocurrencies, and crowdfunding.
Next, learn about the risks involved in investing. Understand the difference between risk and volatility. Understand how to diversify your portfolio. And understand the importance of rebalancing.
Also know the differences between investing strategies.
Finally, learn about the tax implications of investing. Know when taxes must be paid, and how to minimise them.
Learn everything you can about investing, because it will help you become a better investor.
You can start by reading financial blogs like ours or surfing YouTube for videos. It’s best to get yourself exposed to different viewpoints and develop a sense of critical thinking.
Don’t take anyone’s word as the be-all and end-all.
Everyone’s situation is different. Everyone’s needs are different. Everyone’s different.
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Have an emergency fund
An emergency fund is a savings account where you put money away every month for unexpected expenses.
Having an emergency fund helps protect against financial emergencies. So when you’re ready to invest, you won’t be caught off guard by a sudden expense.
If you’re not saving regularly, now’s the perfect time to start. The sooner you start, the better. And remember, this isn’t just for emergencies; having an emergency fund is a great way to build wealth over time.
Start small. Put $5-$10 per week into a savings account. Then, once you’ve built up some cash, consider increasing your contribution amount.
Many sources say you should look to save between 6-12 months of your monthly expenses.
This is a great start, but we prefer to gradually build up to save between 6-12 months of our monthly income.
This makes sure that if there is truly anything that happens to you, you have more than 12 months worth of savings to rely on before getting back on your feet.
Pay off your debt
If you’re just getting started with investing, you may be tempted to invest everything you’ve got right away. But if you want to build wealth over time, you need to pay off your debts first.
Debt is a drag on your finances, and it makes it harder to save money for future investments. So pay off your debts first, and then use any extra cash to invest.
Start by paying off your credit card debt. Then, once you’ve paid off your credit cards, move on to your student loans, car loans, or whatever is due immediately with the highest interest you’ll incur.
While there are many ways to prioritise debt repayments, we like to use the below matrix to decide which you should pay first.
|Repayment Period||Interest Rate||Priority|
The reason why we like to clear debts with shorter repayment times with low-interest rates first is due to the urgency it brings.
You don’t want to get stuck nearing the repayment date and realising you’re short of cash – potentially incurring penalties.
Also, clearing debts fully gives a sense of accomplishment, no matter how small it is. Therefore, doing this keeps us motivated to continue paying for our debts.
Insurance is important because it protects you against financial loss due to accidents, illness, and death.
When you’re young, you may not be able to afford insurance. But there are ways to save money on insurance.
One way is to shop around for better rates. Talk to different friends or financial advisors from multiple firms because everyone might have differing opinions and recommendations.
Remember, financial advisors earn through selling insurance policies. So it’s best you understand thoroughly about insurance, know what you need, and select what’s best for you.
You can start your research from our blog, and then browse through other websites covering the same topic.
But you still need to find a good financial advisor. And that’s where we come in. We partner with trusted and MAS-licensed financial advisors to help you compare different insurers, and recommend the ones that offer the best coverage at the lowest cost.
Another is to find out whether your parents’ insurance plans cover you.
If they do, ask them to add you to their policy. This will give you access to discounts and lower premiums.
However, it’s still best to get your own policies.
Learn how to budget
If you’re going to invest, you need to be able to afford it. This means that you must have money left over every month after paying for your expenses.
That means you should budget carefully and not spend more than you can afford.
When budgeting, keep these tips in mind:
1) Don’t spend too much. Your goal should be to save more than you spend.
2) Keep track of your expenses. Write down everything you spend money on, including groceries, gas, utilities, cell phone bills, etc.
3) Set up automatic transfers to your bank account each payday.
4) Use online banking tools to automate your transactions.
5) Save first, spend later. This means saving a portion (10-30%) of your salary before spending the remainder on your necessities.
Start saving early. Even if you only put $5 per week away, you’ll be ahead of most students who wait until the last minute.
And remember, you can’t build wealth overnight. Save regularly, and you’ll eventually reach financial independence.
Understand the different types of investments available
Investing is not just for millionaires. Anyone who wants to build wealth should learn how to invest.
There are 6 main categories of investment: stocks, bonds, ETFs, unit trusts, REITs, and cryptocurrencies. Each type offers its own unique benefits, risks, and costs.
Stocks are shares of ownership in companies. They’re traded publicly on stock exchanges, and investors can buy them directly from the company or a stock exchange.
Stocks offer diversification, meaning that you can spread your money across many different companies.
These provide a higher level of returns but have much higher risks due to the lack of diversification.
You can read more about stocks here.
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Bonds are loans between 2 parties. The borrower pays interest to the lender, and the loan matures at some point in the future.
Bonds are safer than stocks because there’s no risk of losing your entire investment. However, bonds usually pay lower rates of return than stocks.
You can read more about bonds here.
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ETFs are exchange-traded funds. They’re similar to unit trusts because they pool money from investors and invest it in securities that track indexes. But unlike unit trusts, ETFs trade on exchanges just like stocks.
An ETF is a basket of assets, such as stocks, bonds, commodities, currencies, etc., that tracks an index. An investor buys shares of an ETF at a price based on the value of the underlying portfolio. By buying into an ETF, you buy into the underlying basket of assets.
You can read more about ETFs here.
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Unit trusts are investment vehicles that allow investors to pool money together to invest in stocks, bonds, commodities, real estate, etc. They’re similar to ETFs except unit trusts are managed by actively professional fund managers instead of passively managed.
Investing in unit trusts is a great way to diversify your portfolio and gain access to different types of investments.
But why would there be something so similar?
That’s because while ETFs aim to track an index, a unit trust aims to beat the performance of the index.
However, as unit trusts are actively managed to beat the index, they usually have higher fees involved.
Read more about unit trusts here.
Real estate investment trusts (REITs) are companies that own real estate properties, such as apartment buildings, shopping centres, office buildings, hotels, etc., and lease them out to tenants.
REITs are publicly traded and trade on stock exchanges. They’re similar to unit trusts because they pool money from investors to purchase real estate assets.
There are many benefits to investing in REITs.
Firstly, REITs offer tax advantages because they pay dividends to shareholders instead of paying taxes themselves.
REITs are also considered safer investments because they invest in real estate, which tends to be more stable than stocks.
You can read more about REITs here.
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There are two main reasons why people invest in cryptocurrencies. First, they believe that the value of these currencies will rise over time and thus they get invested early.
Think of it as investing in companies like Amazon and Apple in their early stages.
Secondly, they take advantage of the volatility in the crypto markets to earn a profit.
Investing in cryptocurrencies is risky. It’s the wild wild west and there’s no regulation in place.
There is also no guarantee that the price of a particular currency will go up or down. Also, there is no way to predict whether a specific cryptocurrency will become popular or obsolete.
Thus, you should only invest in cryptocurrency if you really understand the technology and its applications.
Read more about cryptocurrencies here.
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While each type of investment has its pros and cons, understanding the differences will help you decide which type of investment works best for you.
Know your risk appetite
Risk tolerance is the ability to accept and handle financial losses. The more risk-tolerant you are, the more money you’re willing to lose while investing.
If you’re a beginner investor, you should be aware of the risks involved in investing. This means knowing your risk tolerance.
If you’re not comfortable taking risks, then you should consider investing only in safe investments, such as government bonds.
However, if you’re willing to take some risks, then you can invest in stocks, real estate, and other risky ventures.
To determine your risk tolerance, answer these questions:
- How much money do you need to retire?
- What’s your monthly budget?
- Do you have enough savings to cover your expenses?
- How much would you be willing to lose in case of a loss?
- What percentage of your portfolio would you be willing to risk losing?
Once you’ve determined your risk appetite, you can begin investing. But remember, there’s no free lunch. Investing involves risk, so you must accept some loss along the way.
To minimise risk, you can diversify your investments. Diversification means spreading your bets across different types of assets, such as stocks, bonds, real estate, commodities, and cash.
When you diversify, you reduce the risk of losing everything. Plus, you may find that you can achieve better results than when you invested in just one asset class.
Remember, the more risk you’re willing to tolerate, the more money you can potentially make.
Know your time horizon
Time horizon refers to the amount of time you plan to invest in your investment portfolio. The longer your time horizon, the greater the risk you’re willing to take.
If you’re planning to retire at age 65, you may be able to afford to take more risks than if you plan to work until age 55.
But there’s no right answer. Your time horizon depends on your personal goals, financial situation, and tolerance for risk.
When deciding on a time horizon, consider whether you want to maximise your return over a short period of time (e.g., 5 years) or over a long period of time (e g, 10 years or more).
To help you decide on a time horizon, here are some questions to ask yourself:
- How old am I now?
- How much money do I need to retire?
- What is my current savings rate?
- At 6-8% annualised returns, how long will I need to achieve this amount?
- Do I have enough saved to cover my expenses during retirement?
- Will I need to supplement my income after retirement?
- Do I have any special circumstances that would affect my ability to achieve my retirement goals?
- Are there any tax implications associated with my retirement plans?
Generally, the longer the time horizon you have, the better it is for you to grow your money. Time in the market is better than timing the market.
If you let your money compound over a long period, you’ll be surprised how much you can make just by having a longer time horizon.
That’s why many suggest investing earlier, so you can earn more through compounding.
Know your investment goals
Investing is a great way to build wealth over time. But most students and beginners aren’t taught how to invest properly. They’re told to go out and buy stocks, bonds, ETFs, etc., and hope for the best.
That’s not investing. Investing is a long-term process of building wealth through disciplined saving and smart investing.
To learn how to invest, you need to understand your financial situation.
What are your short-term and long-term goals?
Do you plan to retire early? At what age do you plan to retire?
Do you need the money for your wedding or home purchase?
Or do you just want to save enough money to pay off your student loans?
Once you’ve answered these questions, you can begin to set realistic investment goals. There’s no best time horizon to have. Again, everyone’s different.
You should also consider your risk tolerance. Some investors prefer to take bigger risks than others. So you may want to adjust your portfolio based on your personal preferences.
Knowing all your investment goals and risk tolerance helps you engineer what you should invest in, how much you should invest, and for how long you need.
Finally, you must be willing to put in the work required to achieve your goals. To become a successful investor, you’ll need to study finance, budget, track your investments, and keep careful records.
Know how much you can afford to invest
If you’re just getting started, it’s important to be realistic about how much money you can invest.
Start small and build slowly. Don’t go crazy trying to become a millionaire overnight. Instead, set aside $5-$10 per week or whatever you can afford and gradually add to your investment portfolio over time.
This way, you won’t feel overwhelmed to reach your goal. And if you hit a rough patch, you’ll still have some savings left over to help you out.
Although you should already have emergency funds, preferably paid off your debts, and have proper budgeting in place, you shouldn’t just dump the remainder into investments.
You want to keep some cash liquid for unexpected expenses (that are not considered an emergency) and treat yourself occasionally.
Remember, saving money doesn’t mean living below your means. Saving money is simply building wealth. So save enough to live comfortably, but not so much that you’re afraid to take risks.
Decide on a portfolio allocation
One of the most common questions we hear from our readers is “What percentage of my money should I allocate towards stocks?” The answer depends on many factors, including your age, risk tolerance, financial goals, and overall investment strategy.
To figure out where to invest your money, you’ll need to decide on a portfolio allocation. This means deciding on the amount of money you want to put into each asset class, such as equities, bonds, real estate, cash, etc.
Once you’ve decided on your allocation, you’ll then need to determine how much of your portfolio you want to allocate to each asset class.
For example, if you want to have 50% exposure to stocks and you choose to invest $100,000 in total, you’ll need to set aside $50,000 for stocks. Then, you’ll need to divide the remaining $50,000 between bonds, REITs, crypto, and cash. Bonds are considered safer investments, while cash is used for short-term savings/investment opportunities.
It’s important to remember that different asset classes perform differently over time.
For example, stocks tend to outperform other asset classes during bull markets and underperform during bear markets. So, it’s important to consider both long-term performance and short-term volatility when choosing an asset allocation.
The allocation here depends on you as the investor. Here are some common ways to allocate your portfolio.
|Allocation||Risk Level||Return Level|
|80% equities, 20% bonds||Higher||Higher|
|70% equities, 30% bonds||High||High|
|60% equities, 40% bonds||Medium||Medium|
|50% equities, 50% bonds||Medium||Medium|
|40% equities, 60% bonds||Mid-low||Mid-low|
|30% equities, 70% bonds||Low||Low|
|20% equities, 80% bonds||Lower||Lower|
Do note that the above is just a general indicator.
The actual levels of risk and returns will differ based on what you’re actually investing in (Equity ETFs vs individual stocks or corporate vs government bonds).
Furthermore, risk and returns are subjective, and everyone has their own opinion of what is high and low.
So take it with a grain of salt.
Find an investment platform for you
There are many investment platforms that you can start with as a beginner investor.
You have the hands-on options of online brokerages or crypto exchanges, a semi-managed approach via regular savings plans, and a more managed approach such as robo advisors and investment-linked policies.
If you’re looking to invest in stocks, bonds, unit trusts, ETFs, or any other financial instrument, online brokerage accounts are the way to go.
Online brokers offer many advantages over traditional brick-and-mortar stockbrokers, including lower fees, 24/7 access, and no minimum account balance.
However, there are downsides to online brokers too. For example, some online brokers require you to open an account with them before you can trade. And, some online brokers only allow you to trade certain types of securities.
That said, online brokers are still a great option for beginners because they’re relatively simple to use. Plus, most online brokers offer paper accounts, allowing you to try out different trading strategies and platforms before committing to a full-time investment plan.
Check out the best online brokerage accounts here.
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If you’re interested in cryptocurrency trading/investing, there are two ways to start. The first way is through crypto exchanges, where you purchase digital currency (such as Bitcoin) and trade them for traditional currencies (like dollars).
The second way is through ICOs, or Initial Coin Offerings.
However, we’ll focus on crypto exchanges as ICOs are a little more advanced.
Both methods require some technical knowledge, but the process is similar. First, you need to find a reputable crypto exchange. Then, you buy some stablecoins. Finally, you trade your stablecoins for the cryptocurrency you wish to invest in.
Again, crypto has extremely high risk and is generally not really recommended for beginners and students. So invest with caution here.
Check out the best crypto exchanges here.
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Regular savings plans (RSP)
Not to be confused with the savings accounts offered by your bank, regular savings plans allow anyone to invest small amounts of money over time.
Starting as low as $100 per month, you can purchase assets such as stocks and ETFs offered by the RSP by automatically deducting them from your bank account.
This is a great option for those who know what they want to purchase but can’t afford to buy shares at their full amount.
RSPs pool your money with other investors and purchase them on your behalf.
Read more about regular savings plans here.
If you’re just getting started with investing, you may be overwhelmed by the amount of information available online.
That’s where robo advisors come in handy. Robo advisors are automated investment tools that help investors learn how to invest. They offer step-by-step guidance through each stage of the process, including selecting investments, and rebalancing portfolios.
They’re great because they take away the guesswork and allow you to focus on making smart decisions. All you have to do is select a robo advisor, select which portfolio you want to invest in, and deposit your funds monthly!
With as low as $1 a month, you can start investing without worrying about the constant management of your portfolio.
Click here to read more about robo advisors.
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Investment-linked policies (ILPs)
Investment-linked policies are investment plans offered by insurance companies to make it easier for you to start investing.
They invest in unit trusts and your financial advisor will be in charge of managing your portfolio to bring you the most returns based on your risk tolerance.
As mentioned, unit trusts aim to beat market indexes, so you can expect to achieve higher returns as compared to doing it yourself – as long as your financial advisor is good at what they do.
However, ILPs have higher fees than any of the above options, which is a turn off to some.
Regardless, if you don’t want to spend so much time every month to read on the latest news that will affect your portfolio, letting a financial advisor do it for you might be better.
Read more about investment-linked policies here.
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Get financial advice
Wait, why get financial advice at this step?
The reason is simple. You’re a beginner in investing and financial planning, and there are things that you might have missed when planning your investment journey.
Before you actually make your first investment, it’s best to hear what they have to say.
Financial advisors can help you plan out your finances and invest wisely. They can also give you tips on saving money and making smart investments.
They can help you set goals, create a budget, and find ways to save money. They can also help you avoid common mistakes when investing.
When you hire a financial advisor, be sure to ask them questions about your current situation and future plans. Ask them about investment options, retirement planning, tax strategies, and any other topics that interest you.
Ask them about fees and commissions. Make sure you understand exactly what you’re paying for and what you’re getting.
Also, ask them about their background and experience. Find out how long they’ve been working in this field and whether they specialise in certain areas.
Finally, ask them about their credentials. Are they licensed to work in this industry? Do they belong to professional organisations? What certifications do they hold?
These are important questions because they can tell you a lot about the quality of their services.
Purchase your first investment
Once you’ve selected which assets you’d like to invest in and the mode in which you wish to purchase them, it’s time to purchase your first investment!
All you have to do is create an account, deposit your funds, and set up recurring transfers!
If you decide to go to the ILP route, you’ll need a financial advisor for that.
We suggest you read our guide to the best ILPs in Singapore first before making a decision.
Fine-tune your investments
This will come in later on in your financial journey, perhaps at least 3-6 months later, and every 3-6 months thereafter.
Portfolios need to be rebalanced periodically to keep them in line with current investment goals. This means adjusting the percentage of stocks versus bonds in your portfolio based on whether you’re trying to maximise growth or minimise risk.
Rebalancing helps ensure that your investments are properly diversified and that you’re not overpaying for risky assets.
With rebalancing, you’ll also avoid having too many shares of any single stock. Over time, this can lead to large swings in share prices that may cause you to lose money when selling those shares at a loss.
Maybe a new asset class or industry emerged, or an industry is dying off. You’ll also need to replace these assets when rebalancing.
To rebalance your portfolio, simply sell some of your holdings and replace them with others. The amount of each asset sold depends on your current allocation.
If you’re holding a small number of stocks, you should sell just a few shares at a time. However, if you hold a lot of stocks, you may want to sell several hundred shares at once.
Change of investment goals
As you grow older, there might be other things in life that you’ll need to consider that you didn’t factor in when you first started.
Don’t blame yourself for this.
A lot of things in life come unexpectedly.
For example, if you planned to have 2 kids and set your investment goals based on 2 kids, you’ll need to change these goals if you’re blessed with twins or triplets!
You might also need to change your goals if you decide to do a mid-career switch to something that you enjoy. This means starting from scratch and having lesser to invest monthly.
Change of risk tolerance
Tied to the change in investment goals, your risk tolerance might also increase/decrease as your life stage changes.
When you’re young, you’re willing to take bigger risks because you haven’t yet learned to control your emotions. As you age, you become more cautious and careful, and you begin to realise that some investments pay off better than others.
Thus, it’s always important to fine-tune your investments as you progress. This keeps your portfolio current in the economy and updated based on your needs.
Investing takes patience. The stock market is not a sprint; it’s a marathon.
Many newbies expect to make a lot of money over a period of 1-5 years. In reality, you’ll need more time to let your money grow.
This is because the average annualised return of most portfolios is 6% to 8%. So you’ll definitely need to be patient to let your investments compound yearly!
In conclusion, if you want to invest in the future, you need to start early. That means learning how to save money from the very beginning.
Start small and build up your savings over time. Remember that you never know when you might need to use that money, so make sure you keep it safe.
Once you have some money set aside, look for opportunities to invest the remainder. There are lots of places where you can put your money to work, including stocks, bonds, mutual funds, real estate, and even cryptocurrencies like Bitcoin.
Whatever you decide to invest in, make sure you do your homework. Don’t just blindly follow someone else’s advice. Instead, read up on the topic and figure out which investments are right for you.
The key to successful investing is finding the right balance between risk and reward. Too much risk and you won’t earn anything; too little and you’ll miss out on potential returns.
So take your time and do your research. Once you’ve found the right investment strategy, stick with it. Over time, you’ll begin to reap the rewards of your hard work.
If you need financial advice or some help investing, we partner with financial advisors to help you with this.