Many people in Singapore want to invest, but feel they do not have the necessary knowledge and skills to be successful in their investments.
So what do they do?
They either keep their monies in banks, earning miserable interest rates of about 0.2 percent annually, or choose to spend their money.
Both strategies are unwise.
Frets not, for here are three reasons to overcome your psychological hurdle towards investing.
1. It’s actually easy than you think
Many people confuse investing to solving the rubix cube in under one-minute. It isn’t.
Even if you do not know why you should invest, the concept of compound interest would pique your interest.
So what is compound interest?
Consider putting $50 into your savings account every month for the next 30 years at 1% interest (We’re being generous here), you will get about $20,000. Do the same with 8% interest, and you’d get about $75,000. So it pays to start early!
The next question would be – where do I get this 8% interest? The Straits Times Index has returned closed to 10% over the last 10 years, so this would seem to be a realistic target.
Now, you just have to find a way to start buying the Straits Times Index. We would like to tell you, but it is better for you to start doing a bit of homework.
2. Investing in stock is liquid
Stocks are relatively liquid assets. Blue chips stocks are traded with large volume on the market daily.
Most of them are relatively safe counters, especially if they’re based in Singapore and under the umbrella of Temasek Holdings or the Government Investment Corporation (GIC). The risks of these stocks going bust are close to the risk of you suffering a heart attack right after reading this statement.
If you’re not rushing off for a medical check-up now, we assume that it’s a risk level you are willing to tolerate.
There really isn’t much of a benefit putting all your excess monies into a bank. Six to nine months of monthly expenses in your savings account should be sufficient for any unexpected short-term needs.
If you have any amount beyond that, it should be working harder for you in the stock market.
3. It’s a useful mechanism for forced saving
By investing today, you’re forced to save money. Yes we may have said earlier that investing in stock is liquid. However it is obviously still troublesome to have to sell your stocks, pay commission on selling it, just for some short-term gratification.
By investing, you are preventing yourself from spending on unnecessary items because your savings are not in your bank account waiting to be spent.
You will think twice about spending the monies already invested in the stock market – most people would not sell one lot of SingTel stocks just to buy an LV bag.
If you’re still not convinced, let us throw in a small bait – you do not have to pay taxes on capital gains made in the Singapore stock exchange. Unlike other countries, any price appreciations in the long-term will be completely yours to keep.
This article was written for and first appeared on Mothership.sg.
Royalty-free photo from Getty Images. Used with appreciation.
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