5 steps to start investing
Now that you have an idea of the best ways to invest your money, here’s how to start.
1. Identify your goals, time frame and risk tolerance
- Time horizon: Your time frame dictates your risk. The sooner you need the funds, the more liquid you want to keep them. This way, a dip in the market (which always recovers, but we don’t know how long it will take) won’t destroy the retirement fund you’ll need in a year.
- If you’re nearing retirement, typically, a low-risk investment, such as bonds, is the way to go. You would earn less, but the risk is minimal compared to stocks or crypto.
- If you’re younger, you have a long way to go before retirement so you might want to consider setting aside some funds for riskier investment options (like more speculative stocks or crypto).
- Risk: Be honest about how much risk you can reasonably tolerate. Suppose it will be impossible for you to watch your portfolio drop in a downturn. In that case, you’ll want to use a Robo-advisor (which is immune to emotional investing!) or invest in lower-volatility assets like bonds. Remember, an easy way to hedge risk is through diversification — investing in different assets so that your entire portfolio doesn’t depend on the success of one investment.
- Goals: Do you want to be highly involved in picking stocks? Are there some industries you aren’t comfortable investing in? Is your goal retirement, or do you have other shorter terms goals? The answers to these questions and those above will dictate how to invest your money in Singapore.
2. Decide how much help you need
Investors who are just starting or those who have never had the chance to manage their portfolio may consider using a Robo-advisor or consulting an expert. Investors who want to try their luck can always start by themselves, as many platforms have research tools and low barriers to entry. Make sure you use money that won’t impact your life if you lose it.
3. Depending on your goals and investment time frame, you can choose from the below accounts:
- Open a custodian account: The brokerage platform offers a custodian account to store your investment. This account means that you have no direct ownership of these shares as they are held in custody by the firm. It also means that you will have to buy and sell stocks using the platform.
- Open a Central Depository Account (CDP) with the Singapore Exchange (SGX). This account allows you to store investments that are registered under your name.
Most brokerages offer both a custodian account and a CDP-linked account, but you can review the pros and cons of having either using our online guide here.
4. Open your investment account
Depending on who manages your account, there are two types of investments accounts to choose from:
- Standard account with an online broker. This is the most common option for those who want to place their own trades and choose their investments. You will need to open a stock trading account, which is easy and usually free.
- Robo-advisor. This option is for those who want an algorithm to manage their account based on parameters set by the investor.
5. Deposit and invest
Once you open and fund your account, it’s time to put your money to work. Then, you can decide on the best way to invest, depending on your financial situation and goals.
