Who Can Invest?
You might wonder why you should invest in shares when you can stash your money in the bank, which earns you 0.3% per annum if you are lucky, and perhaps 1.8% per annum in fixed deposit.
Banks give us meager interest on our deposits, and inflation can eat into those returns. To find out the impact of Singapore inflation on our retirement funds and quality of life in our silver years, click to read a CNA article about many Singaporeans agree that S$3,000 a month in our retirement years is reasonable.
Investing in good companies can help to not only preserve our capital but also grow it. Investing when you are young can help you to benefit from compounded returns.
Step 1: Open A Brokerage Account
To invest, we need to open a brokerage account, and a Direct Securities Account with The Central Depository (CDP), which is also known as a CDP Account. The article here provides details: How To Open a Brokerage Account
Step 2: Assess Your Situation
Before you set up an investment plan, you need to ask yourself how much you can set aside for savings each month, and how much you can set aside for investments.
This is because the value of your investments would move up or down during your holding period, and you do not want to end up in a situation where you need to sell your investments when unforeseen expenses show up.
Whether you are planning further studies or preparing for job loss, the general guideline is to set aside about 6 to 12 months’ of living expenses, before plowing the rest into investments. If you want the savings to earn some returns, you can consider fixed deposits or money-market funds, but be prepared to forego the interest earned on these savings in case you touch them.
Step 3: Understand And Select Various Types of Shares
If you have not done the things mentioned in the previous two articles, you should really revisit them to build a stable foundation.
On top of equities (or shares), there are other types of investment vehicles available such as REITs, ETF, Unit Trusts, CFDs.
Step 4: Learn the language of business
As Warren Buffett once mentioned: we should learn the language of business before we invest in shares. As such, the next few articles give you a crash course on accounting, without the need to attend school.
“You have to understand accounting and you have to understand the nuances of accounting. It’s the language of business and it’s an imperfect language, but unless you are willing to put in the effort to learn accounting – how to read and interpret financial statements – you really shouldn’t select stocks yourself.”
In our next part, we will share about Steps In Valuing Shares. A share that is selling at $1 might be cheaper than one that is selling at 50 cents. Why is this so? Stay tuned.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice.