As you take your first steps into adulthood, investing just seems like an impossible milestone for the future. After all, when you have to worry about your first home, credit card bills, income tax, and keeping your bank balance above water, investing is often something you can’t afford to even think about.
US$228, that’s how much Warren Buffet started investing with. Of course the amount you invest with makes a difference, but it’s important to look at when, and where. And more important that you even know how to start.
Keep it real (your expectations, that is)
Investing is for the long-term, so be real about your financial situation. Have emergency savings that could tide you over 6 months, have insurance plans in place, and have a very clear picture of your debt. You don’t want to be caught in a situation where you are forced to sell your stocks and shares at a major loss for some immediate liquidity.
Losses are incredibly possible. Which is why being realistic about investing is crucial. In the real world, overnight windfalls are not an everyday occurrence.
Make small, regular investments
There’s really no need to jump into the deep end of the pool when you’re starting out. With different Regular Shares Savings (RSS) plans which are monthly investment plans, you can start investing from as little as $100 a month. These usually have higher interest rates than regular savings accounts – but that’s not to say they should replace your savings account. They’re simply a great complement to your existing savings plan to supplement your monthly returns.
Manage your appetite, for risk
It’s not a sprint to get to your first million, it’s a marathon. Don’t succumb to risky investments because you’re lured by high returns. Understand your risk appetite and select something that is within your investing capacity. Think of it as loaning money to a trusted friend, and receiving extra with the payback.
Singapore Savings Bonds (SSB) is one such example. A number of years after you’ve bought your bond, you’re guaranteed a return. And, you also have the freedom to redeem the bond before the return date, but with lower interest.
Use your CPF money wisely
Yes, you can use your CPF for more than simply financing your first home. As long as you have more than $20,000 in your Ordinary Account (OA), any “excess” can be used to invest. Monies in your Special Account (SA) can also be used for investment, but the threshold is at $40,000 instead.
With a lower interest rate of 2.5%, it is preferential to invest with your OA as you’ll have a greater chance of yielding returns higher than that, as opposed to the 4% interest rate on your SA. This is one way you can boost your retirement fund, as you’re investing for the end game.
Don’t put all your eggs in one basket