This article is brought to you in collaboration with StockFacts. Views expressed in article are the sole opinion of DollarsAndSense.sg
One fear that many of us have when we start investing is being afraid that we don’t have the knowledge, nor the time, to adequately understand and monitor our stock investments.
This fear often paralyses us from embarking on our investment journey. Some of us may even end up investing in other instruments such as unit trusts and investment-linked insurance policies (ILPs) because we are not confident of investing on our own.
But is investing on our own really that difficult? And how much time do we need to spend before we can feel confident enough to manage our own portfolio of investments?
It Makes Sense To Start Locally
Similar to other important life skills such as learning how to cook and how to drive, it’s better to start learning how to invest in the relative comfort of our local market.
With more than 700 stocks to choose from, the Singapore Exchange (SGX) is a logical starting spot on your investing journey.
You could think of it as being similar to how you should learn to cook dishes that you enjoy eating, or drive around neighbourhoods that you are familiar with when you first get your driving license. In the same vein, your first foray into stock investing could be into companies that you like and are familiar with.
These could be telecommunication companies using such as SingTel, StarHub or M1, banks that you have a banking relationship with such as DBS, UOB and OCBC to even supermarkets that you frequently go to such as Sheng Siong and DairyFarm International (running Cold Storage in Singapore).
By investing in these companies that you frequently interact with, you would naturally start to understand how they operate, whether they are offering competitive products and services, and whether or not they are growing or declining in market share.
Of course, this isn’t to say that being a frequent shopper of Sheng Siong, or a telco user with SingTel would automatically make you a good investor or these businesses great companies.
Our point here is that by investing in local stocks that you frequently encounter or hear about, you would enjoy an advantage that otherwise wouldn’t exist if you are invested in overseas stocks.
Look At Key Financial Indicators
Beyond just experiencing a company’s products and services, it’s also important to look at its financials. You want to invest in a company that has strong, healthy financials, not just companies that you have a positive experience with.
In a previous article, we highlighted some key financial ratios that you should know about before investing into a stock. Here’s a summary of them
|Financial Ratios||How It’s Calculated?||Why It’s Important?|
|Price-To-Earnings (P/E)||Price per share/earnings per share||Tells you how much you are paying for each dollar the company earns|
|Price-To-Book (P/B)||Price per share/book value per share||Tells you how much you are paying for each dollar of net assets that the company has|
|Dividend Yield||Dividend yield/share price||Tells you the percentage of dividend a company pays out to its shareholders, based on its current share price|
|Volume Weighted Average Price||Total value of stocks transacted over a defined period/total volume transacted in the period||Tells you the average price of stocks over a defined period|
|Market Capitalisation||Stock price multiplied by number of shares issued||Tells you the total market value of the company, based on current share price|
It’s easy to find these key ratios. SGX has a stock-screening platform called StockFacts that is free to use. You can even take advantage of the platform to find suitable stocks based on the criteria you have set in place. These criteria could include those that we’ve have mentioned above, or other criteria that you think are important.
Stay Updated With The Market
Once you have invested or shortlisted some stocks, you should spend a little time each week keeping yourself updated. Think of this as similar to your weekly gym session, where you may spend 1-1.5 hours keeping yourself in the loop on what’s happening in the stock market.
Once again, StockFacts can be a convenient source for you to get the news that you need for the stocks that you are following. StockFacts compiles information from various sources such as announcements made by the company, the consensus price target by analysts who are covering the company and news relating to the stock.
You can get access to all these news just by going to StockFacts.
Source: StockFacts, SGX
Experience, Understand & Stay Up-To-Date With The Stocks That You Invest In
To sum it up, what we suggest for anyone who wishes to start stock investing is to
(1) Start with local stocks that you are familiar with
(2) Understand the financials of these stocks that you have shortlisted
(3) Monitor the stocks using a stock-screening platform such as StockFacts