Before you start something new, taking the first step is always the most difficult, liking riding a bike for the first time or catching a plane on your own for the first time. It is pretty much the same with investments. Like everything else, you are probably going to struggle initially and you may not be able to figure out what to do that easily. Under such circumstances, it is quite likely that you may take the help of your family or friends. However, to set yourself on the right track to achieve your investment goals even with a small amount, you will have to take some fundamental steps.
The fear of investing your money is the first thing that you have to get rid of. The ideal way of doing that is by investing small amounts. You can start from the safest form of investment such as unit trusts. Once you become more comfortable, you can choose to invest in other forms of investments such as shares and bonds.
If you are in Singapore and you are planning to start your investment journey, then here are a few steps to guide you before you start investing:
1. Have a back-up plan that can help you tide over troubled times
Before you start investing your money, even if it is in small amounts, you must have at least six months of savings. This will be very useful in case you are faced with a situation where you lose your only source of income and you do not have any clue about when things will get back to normal. By doing so, you will not be compelled to sell your investments at a loss.
If you only have a single savings account, make sure you open another account and start saving in that account and avoid taking out money unless it is absolutely inevitable. Unlike accumulating all your money in a single account, it is a lot easier to track your savings goal when you have separate accounts – each with its own purpose.
You must also make sure that you are insured before investing. Even if you wish you never have to use it, it is absolutely essential. This will help you if you are faced with a major crisis.
2. Know why you are investing
Before you start a new venture, you must always know the purpose of starting that venture. It is the same with investments, identify the reasons why you want to invest your money and take the first step keeping in mind what you want to achieve in the long run.
It is important to identify your financial goals because the investment options for different goals are different. For example, investing money in fixed deposits is more suitable for creating a fund for retirement as these are risk-free and come with assured returns.
3. Figure out where the money will come from
Once you have set aside enough amount for emergencies, you will have to find out ways to procure money for your investments. In the beginning, when you only invest in small amounts, you can get the money from your savings. However, once you start increasing the amount you want to invest, you must know how much you would need each month and where are you planning to get the money from. There are numerous online calculators that can help you with this. Create a budget based on your financial condition. For instance, if you plan to increase your investments based on a salary increment you are expecting, wait until you actually get the increment before making the decision on how and where you choose to make new investments.
How You can Start Your Investments with S$100
Even if you set aside just S$100 a month, you can choose from several options when you want to start your investment journey. When you start with a small amount, you will have more shares when market prices are down, and fewer shares when market prices are up.
You can make use of digital financial advisors, also known as robo advisors to manage your portfolio and get financial advice via a digital platform, without the need to spare time out of your daily routine to chat with someone face-to-face. In Singapore, StashAway, AutoWalth and Smartly are the chief robo advisors and each robo-advisor adopts a unique procedure to determine an ideal investment allocation for beginners.
Mutual Funds or Units Trusts
If you are comfortable with pooling in money with others and assigning a fund manager to invest that money on your behalf, you can opt for unit trusts. Even if you have to pay an initial fee to maintain the fund, it is less risky than investing directly in bonds as your investment gets diversified. If you do not mind letting someone else monitor the stock markets for you, unit trusts are a good option.
Regular Share Savings
With Monthly Investment Plans also known as Regular Shares Savings Plan, you can start investing in stocks on the Singapore Exchange. With this plan, you can start from S$100 per month. If you want to start off with an investment plan, you can do so with any of the brokerage firms/banks in Singapore offering it. With a monthly investment plan, you have complete control over your decisions. If you want to put in your money in different organisations every month or enhance your investments or stop investing altogether, you can just instruct your brokerage firm regarding your decision.
In addition to the tools mentioned above, there are other tools that you can use such as dividend stocks, value-growth stocks, insurance plans and more.