Must-Read: Investing for Beginners in Singapore

Today's inflation rate in the United States is at 9%. In Singapore, it's at 2.9% in March, the highest percentage the country has seen since 2012. If you're not concerned with this news, read more news about the impact of inflation on your money and your life as a consumer. This is exactly why financial literacy courses are popping up more aggressively -- because more people need them.

Research shows that about half of the American adult population is considered financially illiterate, meaning they cannot manage their money properly. In Singapore, financial literacy is at 78%, which is a good benchmark as compared to its counterparts in Asia.

Still, these statistics remind us that money is a topic that is often not prioritised in the traditional school setup. We, regardless of location, aren't taught how to invest, prioritise getting insurance, or save for rainy days. So what typically happens when we finally leave the universities and get our jobs is we spend every bit of it or perhaps save our money in the bank.

If right now you aren't reacting violently to what you just read, know that this is exactly the problem. We believe that saving in the bank is the best we can do. To protect our money, yes, but to grow it... nah, better look someplace else.

Read what we've written in the first sentence. Inflation -- this is our money's enemy. So our goal must be to put our money where the interest is higher, not lower, than inflation. As it sits in the bank, the interest it earns per year is a meagre 1% (or even less actually). If you think about it, we even lost our money!

With all this said, we hope you've concluded by now that investing is no longer a question of why, but a question of how. All investors started just like you, but some of them dived head-on without really knowing what they're investing in. Hence, you hear complaints about how they lost money in the stock market or even discouraging remarks on investments in general.

Where to invest my money

Investing is a way to grow money. It's why people do it. And we believe it's the exact reason you want to invest as well.

But it's never a good idea to invest blindly, wherever you want to put your money in. Conviction isn't and won't be enough. What you need is the proper knowledge to navigate it with confidence, and of course, to get great returns over time.

In Singapore, there is a wide variety of investment assets beginners can explore. Each comes with its own set of risks and rewards, so you ought to be careful what you choose. Below are quick guides on the various options you have on where to put your money.

• 6 Asset Classes to Know About
• Investing in Alternative Assets
• How to Start Investing Your Money in Singapore

At VI College, our mission is to help people like you create sustainable wealth through stocks investment, using a strategy called value investing. So, allow us to tell you more about this topic.

First, we want you to understand three things about this investment vehicle:

1. Investing in stocks has risks

Think of investing as swimming. You swim because you want to reach a destination, perhaps financial freedom or a sizeable retirement fund. But the water isn’t as friendly as you wish it to be. You can drown, get injured or dehydrated, suffer hypothermia or cramping, or bump into foreign objects and strong currents.

Similarly, in investing, risks are present everywhere. By risks, we mean uncertainties. It’s not certain you’ll lose or gain money over a particular period.

See also: Low-Risk Investments in Singapore

But we won’t say investing is a gamble. When you gamble, you hold on to pure luck. In investing, you study numbers. You don’t just pick stocks blindly, but you must do it systematically.

As a beginner in investing, in Singapore or wherever, you have to understand that investing is not a one-night adventure but a long drive where you need to stop and look back every now and then to evaluate if you’ve taken the right paths and jumped the right bridges.

After all, we can’t time the market. This has been what successful investors are telling us. At times, the market will go bullish. At times, it will swing down. But we can’t predict when.

The risk is in not knowing the market movement. There are also economic, socio-political, and liquidity risks on top of market volatility.

What we can only do is make an informed purchase that can weather market fluctuations. This way, we reduce risks.

2. Buying a stock is buying a business

Another fact you should not ignore as a beginner in investing is this: a stock is a business.

When you buy a stock, you become part-owner of a business. For example, if you purchase Amazon shares, you buy a percentage of ownership of the company.

But being a shareholder doesn’t necessarily mean you get the benefits and/or responsibilities similar to Jeff Bezos. When you buy into a company, it doesn’t mean you get to be the CEO for a day. Rather, it means you trust the business enough that you decide to put your money in hopes that the company will achieve growth in the long term.

Companies issue stocks to raise funds they can use for operations. Stock investors, such as yourself, can gain profit whenever the share price of a company increases. They can also get money from dividends paid out by the company whenever it registers growth.

The price of stocks is determined not by a company’s performance (although the company determines the initial stock price). Oftentimes, the market doesn’t genuinely reflect what stocks are worth, because the prices are determined by the market sentiment. For example, when there are more buyers, the price will go up; whereas, when there are more sellers, the price will go down.

As a beginner investor, you have to realise that successful investors accumulate their wealth by holding on to their stock picks, not by trading regularly. This is because they want to maximise the interest compounded every year.

3. Investing requires research

We mentioned above that investing, like swimming, has risks. But these risks can be avoided when we are adequately prepared for the investing journey we’re about to undertake.

To reduce your swimming risks, you have to familiarise the currents, practise proper breathing and strokes, hydrate, and do proper conditioning.

Picking a stock is the same. You just don’t close your eyes, roll some dice, and buy whatever the dice point to. You have to check if the company meets what we call the 3R concept: right business model, right management, and right valuation versus price.

Investment research includes reviewing if the company’s past three- to five-year financial performance is good, if it has a competitive advantage in the industry, what its plans to grow the business are, and if the business will likely be around in five or ten years.

You also have to delve deeper and evaluate its management: are they performing well, is there trust in their capabilities from their employees, and are they capable of moving the company forward? Lastly, you have to check if their share price reflects their true value and if you’ll make a profit when you buy the stock today.

Investing in stocks is not a get-rich-quick scheme. You have to work to pick the best stocks so, in the future, you’ll just sit and relax while waiting for dividends and capital gains from your investments.

How can I invest $100 in Singapore

From the above, you might feel that investing in stocks is intimidating... or that it requires a lot of capital. Don't worry, a lot of beginner investors think so, too. But did you know you can start investing in stocks with as little as $100?

Stocks or shares are priced differently. You can find stocks priced at $1, $5, $10, $100, $1000... you catch the drift. This means that with your $100, you can already buy several shares of companies priced below your budget, considering of course, they have growth potential.

• Cheap Stocks to Buy in 2022
• Cheap Stocks That Pay Dividends

You may also use dollar-cost averaging as your strategy. You'll set aside a fixed amount to invest each month, for example $100, and when stock prices are low, you can buy more, whereas when stock prices are high, you can buy fewer shares. Still, every month, you're able to buy shares without increasing your investment amount.

Another option is to invest through a regular shares savings (RSS) plan in Singapore. It's best to kickstart your stock investment journey in Singapore, and some banks offer plans that require as little as $100. The strategy is the same -- you'll invest a fixed amount of money each month and you'll get full control over investment decisions for your portfolio.

How can I start investing in Singapore

Knowing you can invest with as little as $100, you must be thrilled to start your stock market journey. The elephant in the room though is: Are you ready?

By this question, we don't mean your funds or your willingness. We mean your knowledge!

Wait... you didn't think you can do it straight away without learning more about it, did you? Oh well, sorry to rain on your parade, but we strongly believe in learning prior to earning.

If you don't fill your knowledge tank before going deep, you might drown and lose your money... because you won't know what you're doing (or maybe you think you know what you're doing, but in reality, you're just crossing your fingers the journey will be smooth-sailing).

Should you choose to invest in properties in Singapore, look for mentors that know the ins and out of real estate. Or if you think your risk tolerance level is suitable for cryptocurrency-related investment, go for a programme that teaches all about this topic.

If you want to invest in stocks, feel free to come to our free webinar. We'll teach you all there is to know to make sure you reduce the risks that come with this investment. All you need to commit is your time.

Then of course, the next step is to prepare your finances. Make a plan. Answer the following questions:

1. Do you plan on investing a fixed amount monthly or do you prefer to do lumpsum investing?
2. How much are you going to invest?
3. If you invest this amount of money, how much cash do you have to spend for emergencies?
4. Are you comfortable losing your money?
5. What's your investment goal?
6. Will you invest for the short-term or long-term?

The next thing is to secure the requirements for your investment. If it's stocks, you have to open a brokerage account and fund it accordingly. If it's real estate, you have to secure the contracts, documentation, and permits. If it's cryptocurrency, a digital wallet is required.

You see, investing shouldn't just be something you suddenly think of. It requires commitment, patience, and definitely knowledge. 

So, go ahead, prepare for it, and we wish you the very best!