Investing lets you reach financial goals – think buying a home, retiring well, or covering education costs. It’s like putting your money to work, growing wealth, and ensuring a secure future. Knowing the “how” and “why” is key, much like planning a trip with a clear destination in mind.
Why Invest Our Money?
Empower Independence: Seek Freedom Beyond Employment or Business.
Diversify Growth: Amplify Impact, Surpass Deposit and Bond Returns.
Outpace Inflation: Safeguard Capital Against Diminished Currency Value.
Ensure Comfortable Retirement: Secure Desired Post-Employment Lifestyle Amid Savings Concerns.
Exploring Investment Returns and Financial Success
So first off, here’s the truth:
“Investing will not make you rich or replace your salary unless you have a sizable capital to compound with.”
With $100,000 compounding at 8%, you earn $8,000 yearly or $670 monthly—an adjunct income. To achieve $4,500/month (average Singapore salary), you require a $562,500 investment capital.
Singapore CDP & Stock Brokerage Accounts
Establish a Central Depository (CDP) account, requiring financial stability and minimum age of 18, for managing purchased stocks.
For setup, choose between the following options:
- Visit CDP directly or access SGX’s website for online application. Alternatively, complete and mail the form to SGX CDP Customer Service.Customer Service located at 9 North Buona Vista Drive, #01-19/20, The Metropolis, Singapore 138588.
- Select a licensed brokerage firm to facilitate CDP account creation while opening your brokerage account.
- CDP: Stock Storage, Similar to Bank Accounts.
- Brokerage: SGX Stock Purchase Tool. Broker-assisted trade costs $40+, while online trading averages $25.)
You have a variety of investment choices: stocks, REITs, ETFs, and bonds. Risks differ; stocks can be volatile, while bonds are affected by interest rates. Benefits include stock growth and bond stability. Returns and capital gains span a wide spectrum.
A stock is a share in the ownership of a company.Shareholders receive dividends based on their stake in company assets and earnings.
Stocks as Engines of Wealth Creation :
Dividend income: Companies share a portion of earnings with investors via regular payouts (annual, bi-annual, or quarterly) based on their dividend policy.
Capital gain: Profits from selling stocks above purchase cost contribute significantly to overall investment returns. Combined with dividend income, they determine total returns.
Blue Chip Stocks: Blue chip stocks are shares of well-established, financially robust companies, often market leaders with large market capitalization. Recognizable and transcendent, e.g., DBS, OCBC, HongKong Land in Singapore. Considered low-risk investments, returns tied to company performance.
Value Stocks: Value stocks are priced below intrinsic value, often smaller market cap. Unloved by the market due to unglamorous traits, yet with solid fundamentals.
(In short, value stocks are be based on:
- Assets — Price to Book,
- Earnings — Price to Earnings
- Cash flow — Price to Discounted Cash Flow)
Exchange-traded Fund: ETFs trade like stocks, holding diverse assets (bonds, stocks, commodities), mirroring tracked indices for efficient, cost-effective, diversified portfolios.
Monthly Investment Plans:
The Monthly Investment Plan, or Share Builder Plan, allows systematic investing of a set amount in an asset, utilising dollar-cost averaging. Fixed monthly investments adjust shares based on price trends, optimising returns.
In Singapore, there are 4 companies that provides monthly investment plans:
- OCBC Blue Chip Investment Plan (BCIP)
- Maybank Kim Eng Monthly Investment Plan
- POSB Invest Saver
- Phillip ShareBuilder Plan
- New earners with limited capital
- Those averse to stock analysis
- Risk-averse individuals, favouring stable, dollar-cost-averaging approaches to mitigate volatility.
Bonds assure stability, low risk. Investors lend, receive interest (coupon), expect full repayment at maturity. Singapore Govt. Securities and Savings Bonds offer secure returns. Corporate & Retail Bonds yield higher returns, bearing increased risk.
- Desire reliable interest
- Prefer low-risk, moderate returns
- Prioritise principal repayment; ideal for risk-averse investors.
Other Investment Avenues
Properties, especially well-located, offer appreciating value, utility, rental income potential. Singapore’s land scarcity and rising population amplify attraction. Management and maintenance entail costs, yielding potential returns.
For young investors, Singapore REITs offer accessible real estate exposure. REITs yield passive income through dividends and capital gains from professionally managed property portfolios.
REITs encompass diverse property types: Office,Retail, Hybrids, Industrial, Healthcare, Hospitality,Residential.
Investors seek higher returns than CPF interest. CPF, compulsory for Singapore Citizens and PRs, aids retirement funds.
CPF has 4 accounts:
- Ordinary (OA) – housing, insurance, investment, education with an interest rate of 2.5%.
- Special (SA) – old age, retirement products with an interest rate of 4%.
- Medisave (MA) – healthcare with an interest rate of 4%.
- Retirement (RA) – from 55 with an interest rate of 4%.
Unit Trusts (Mutual Funds)
Unit trusts, or mutual funds, favored by investors. Investment-linked policies and expert management appeal to many. Professional fund managers handle investments.
- High management fees reduce earnings
- Active funds often underperform index
- Manager restrictions
- Sales charges impact returns.
Cryptocurrency, digital payment method, limited acceptance. ICOs create company-specific tokens. Blockchain technology decentralises transactions. Bitcoin, most popular, value surged. Invest with caution, understanding risks, potential value.
Crowdfunding offers SME investment for high returns. Retail investors gain interest, capital repayment. Small firms access public capital, bypassing hefty administrative costs.
Angel Investing (startups), Gold, Robo-Advisors (akin to monthly investment plans) for diverse investment avenues.
- Understand the “why” to achieve financial goals and secure your future by making money work over time.
- Explore stocks, REITs, ETFs, bonds, properties, and more for varied risk and return choices.
- Stocks offer dividends and capital gains; blue chips for stability, value stocks for potential.
- Use Monthly Investment Plans for disciplined, stable investing, suitable for new earners and risk-averse.
- Consider properties’ value and rental potential, and maximise CPF accounts for retirement planning.
- Approach cryptocurrencies carefully, considering risks and potential value, amidst limited acceptance.