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Guide to Investing in Singapore (2021)

01 Jul 2021

Guide to Becoming a Confident Investor Singapore 2021 | VI
(c) Sadie Xiao

Investing is not something you’re born to do. It’s something you learn (and choose) to do.

If COVID-19 and the uncertainties that came with it have pushed you to think about investing in Singapore, you’re not alone.

Since the first quarter of 2020, more and more Singaporeans have been exploring ways to grow their hard-earned money.

Despite the ongoing crisis's unfortunate effect on businesses, inflation, and supply chains, a lot of us held on to the silver lining of this pandemic. For many, today is a ripe time to invest in Singapore, a country teeming with opportunities to grow money.

See also: Why You Should Invest During COVID-19

What investors in Singapore should first understand

Some hesitate to invest thinking they need a ridiculously large amount of money to start. But in reality, investing in Singapore doesn’t require huge capital. You can start with a modest S$500. You can even start with allocating as little as S$10 a day.

Some get scared to invest because of the risks involved with investing in Singapore. Frankly, everything has risks. No investment comes without risks. If you ever hear someone boast about a “risk-free” investment, run away because it is likely a scam.

See also: Low-Risk Investments in Singapore -- Do They Exist?

Each of us has a different risk appetite (you can assess yours through several online questionnaires). Depending on how low or high your risk tolerance is, you can choose the best investment option to put your money in.

Good thing is that there is a bunch of great investment ideas in Singapore you can choose from. Everyone can, therefore, invest as long as you are confident in what you’re doing.

The key to becoming a confident investor is first knowing what options are available to you. Where should you put your money in? What’s the risk? Why should you choose stocks over real estate or ETFs over fixed deposits?

Here we list the different ways to invest your money in Singapore, plus their pros and cons to help you gauge your alternatives and make an informed decision.

Financial Investment Options

Investment Option

Definition

Pros

Cons

Fixed Deposit or CD (Certificate of Deposit)

A deposit you make in the bank, but with a specified date of maturity (or the date when you can withdraw the funds without having to pay penalties)

  • Easy to understand
  • Safest investment option
  • Guaranteed return on capital
  • The longer and higher your deposit, the higher the interest
  • Not too liquid (meaning you can’t withdraw the cash in times of emergency without having to pay some fines)
  • Not too high returns
  • The interest rate depends on banks

SSB (Singapore Saving Bonds)

These work as if you are lending money to the Singapore government. Your returns will be the interest over time.

  • Safe because it’s backed by the government
  • Interest increases over time
  • Can withdraw funds when you need them
  • Lower rate of return compared to when you invest in stocks

Mutual Funds

Pooled money from several investors which is then distributed across stocks, bonds, and securities

  • Managed by portfolio managers, hence, experts
  • Don’t require a huge amount to invest
  • Give you a diversified investment portfolio
  • Highly liquid, all you need is to notify your fund manager when you want to withdraw funds
  • Charge annual fees, usually 1-3%, to pay portfolio managers
  • You have no control over your funds

ETFs (Exchange Traded Funds)

Similar to mutual funds but can be traded on the stock exchange and are valued throughout the day (unlike mutual funds which are valued at the end of the day)

  • Flexible, meaning can be bought and sold on a trading day
  • Cheaper and more liquid than mutual funds
  • Lower management fees versus mutual funds
  • Often have lower dividends than mutual funds
  • Lesser diversification of stock portfolio
  • Higher investment cost versus investing in stocks

Stocks

Investments that make you become a shareholder or part-owner of listed companies

  • Easy to start doing
  • Liquid, you can withdraw your funds easily at any time
  • Offers great returns provided you know how to evaluate a company’s value
  • Picking stocks can be difficult for beginners, especially without proper knowledge of the stock market

REITs (Real Estate Investment Trust)

Like a mutual fund for real estate, meaning you can be a part-landlord of a commercial or residential property

  • Can provide a stable and secure income over a reasonable period
  • More liquid as compared to buying actual real estate
  • Returns depend on several factors, i.e. movement restrictions and status of the property market
  • Difficult to get high returns during today’s crisis
  • Property taxes could suddenly rise

Non-Financial Investment Options

Real Estate

Same as REITs, but this means you buy properties directly (i.e. owning HDB apartment, condominium, or landed houses)

  • Property value appreciates over time
  • Can be a stable income source, i.e. rentals
  • Requires high capital and high maintenance cost/effort
  • Not liquid

Precious Metals

Can be gold or silver (bought as jewellery, bars, or coins) or paper gold (traded through ETFs)

  • Considered safe investments as they don’t lose value even in unfortunate market conditions
  • Safe from rising inflation rates
  • Highly valuable
  • Require high capital
  • Require top-notch safekeeping

Art and Collectables

Artworks like paintings and sculptures or collectables like specially designed coins

  • Can be sold for profit as the value of art and collectables can easily appreciate over time
  • Not all art pieces are authentic, hence, may not appreciate in value

Now that we’ve presented you with various investing ideas you have in Singapore, it’s up to you to weigh the pros and cons. Remember to understand the risks while contemplating the benefits of each investment vehicle.

If you want to take another step forward in your investing journey in Singapore, you’re welcome to join our free online bootcamp.


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