Thinking that it is extremely technical, complicated or akin to gambling, many people in Singapore may be intimidated to start their investing journey. This mindset often paralyses them into inactivity.
Rather than leave your savings in low-interest bank deposits and see it beaten by inflation, what you should be doing instead is to learn the key concepts of investing, and to put in place a simple investing plan that you can easily follow through in the long-term.
To do this, you need to build a basic foundation of knowledge to guide your decisions.
Building A Strong Knowledge Base
Knowing the different types of investments available to you and understanding key concepts such as leveraging on compound interest and recognising your risk profile to guide your decisions are important.
To start accumulating knowledge, aspiring investors can turn to numerous trustworthy online sources such as Investopedia, speak to family and friends who have successfully embarked on their investment journeys as well as get in touch with companies such as Fundsupermart who can help investors take their first step into various markets that they can invest in.
One such platform they can use is FSMOne, an online investment platform from Fundsupermart that encourages people to take control of their own finances through information and help them to get started by offering multiple financial products, globally, all within one easy-to-manage account. In addition, the platform prides itself on offering a diverse variety of investment choices and is transparent with all its charges detailed on its website.
After gaining the relevant knowledge, investors can then choose to invest by themselves, with professional guidance or with My Assisted Portfolio Solution (MAPS)
Making Diverse Types Of Investments
For budding investors, there are four broad asset classes – bonds, funds & exchange traded funds (ETFs), stocks and insurance – of investments they should consider adding to their portfolio.
Insurance is an important aspect of financial planning, and investors should have this base covered before embarking on wealth building.
Health insurance generally provides protection for our ability to continue working. Such policies include hospitalisation, critical illness and disability income. Life insurance is usually meant to cover our dependents well-being in the event that we are no longer around. Such policies include term and whole life insurance.
To help its users to make better decisions, FSMOne breaks down its insurance planning into life stages that people typically go through, namely working adults, married couples starting a family, new home owners, children and retirement.
Buying insurance through FSMOne is also cheaper as the platform provides a 30% commission rebate to users so you not only get convenience, but also pay a lower price as well.
The most popular asset class is the ordinary stock. By investing in stocks, investors become an owner of the business. This means they have a say in the company’s key decisions such as appointment or retention of a board member or on matters such as mergers or divestments.
Investors can take part in the success of a company in the forms of receiving dividends from earnings or seeing a rise in its valuation via its share price. The converse is also true as owners may realise losses when the companies they invest in do not do well.
The biggest positive for stocks is it relative liquidity compared to other asset classes. Stocks also have the best potential for capital gains as, historically, it has delivered the highest returns over a long-time horizon. Many good performing companies also consistently distribute dividends to its investors.
And if you are a young investors looking to explore the investing world, FSMOne has its Young Investors Programme that aims to empower younger users with the right knowledge through a comprehensive range of seminars, workshops as well as to provide up-to-date and interactive information via its FSM Mobile app.
Bonds are debt issued by governments and companies typically to finance their operations. In essence, bond issuers are borrowing money and bondholders are the lenders. In return for lending their money, bondholders are paid a regular stream of coupons (or interests) at a fixed rate over a predetermined period. Once the bond matures, the principal sum is paid back to the bondholder.
There are a variety of bonds in the market, ranging from lower risk Singapore government bonds to riskier corporate bonds. Investors should take note of this and understand that returns move in tandem with risks, which means bonds that offer higher coupon payments will generally be riskier than bonds that offer lower payments.
FSMOne offers investors access to new bond issues, Singapore government bonds and a selection of over 650 retail and wholesale bonds issued in both Singapore Dollar or US Dollar. Minimum investment requirement can start from as low as S$1,000 to as high as $1,000,000. Likewise, returns differ depending on the bonds or bond funds offered. For example, a bond offered by SMRT offers a coupon rate of 1.2%. Other companies such as Lippo Malls Indonesia Retail Trust provides a much higher coupon rate of 7%. Investors can choose which bonds or bond funds fit into their risk profile.
It also provides important tools to help investors select bonds that meet their needs, offer detailed charts to track its prices and provide a calculator to estimate returns.
Read Also: Meet The Bond Family
Funds & ETFs
Another asset class that investors should consider adding to their portfolio is funds and ETFs. This asset class pools people’s money together to invest into a range of underlying assets. This helps them achieve diversification more efficiently and cheaply compared to investing in the assets individually. However, there are key differences in the two asset classes.
Funds (mutual funds and unit trusts) are invested into a variety of assets including stocks, bonds and other investments, and tend to be actively managed by a fund manager. As there are active managers consistently working to beat the market returns, such investments typically charge a higher management fee.
That said, it’s worth noting that actively managed funds do tend to have a higher chance of beating the market index in emerging markets, where information flow is slower and the market is less efficient. In such market, fund managers are able to more value to investors through superior research and analysis. You can read more about this on a research article written by Fundsupermart.
ETFs are funds that are traded on stock exchanges, and investors are able to purchase them similar to how they would purchase a stock on the market. Like funds, it invests into a variety of assets including stocks, bonds and other investments. ETFs are generally designed to mirror an index and there are no managers trying to beat the market. Hence, management fees are usually lower.
Another key difference is that funds in Singapore can usually only be purchased and redeemed at its Net Asset Value as at 3pm each day while ETFs can be purchased or sold at any time during the day at market value on the stock exchange.
FSMOne offers investors a useful Fund Selector tool to compare and invest into funds and ETFs based on their preference on asset managers, risk ratings, underlying assets, geographical sectors or base currency.
For those who are not yet confident of selecting investments to create, monitor and rebalance a portfolio on their own, FSMOne’s My Assisted Portfolio Solution (MAPS) is an online investment advisory service that frees you from doing this.
Based on five differing levels of risk ratings, investors are able to see a simulated long-term performance of a portfolio based on asset allocations and choosing between income or growth investing.
After doing this, investors will get an idea of the constituents their investments will likely encompass as well as its risk ratings.
Lastly, investors can view a simulated chart on the expected best, average or worst-case scenario over a defined time horizon, investment amount and monthly contributed amount so that they get a better understanding of how they can achieve their long-term financial goals.
In developed markets such as the USA and UK, such assisted portfolio solution are taking off as investors like the convenience of leaving investment decisions to a platform or portfolio manager that can decide for them based on their own customised requirements. Moving forward, we expect this area to continue growing.
All On One Platform – FSMOne
This can all be done fuss-free on the FSMOne platform. FSMOne will handle all the paperwork free-of-charge for you to transfer in your funds, bonds, ETFs and stocks onto its platform so you get to enjoy an all-in-one platform experience to monitor your investments in a single view and provide savings when you make transactions.
This article was written in collaboration with Fundsupermart. All views expressed in the article is the independent opinion of DollarsAndSense.sg
Bonds and Fixed Income