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Money

The foolproof guide to making your first investment

M / Money

The foolproof guide to making your first investment

Here are some useful tips from OCBC Bank experts on how to get started on your investment journey with just $100

January 11, 2021
OBCB Investing Investment Beginner Guide

Credit: Kelly Sikkema/Unsplash

As it turns out, when it comes to personal finance, most women still don’t get it. A recent survey by OCBC found that only about 60 per cent of women have investments. Men, on the other hand, are better prepared – with 75 per cent of male respondents saying that they have investments. 

By now, we are all well aware that having investment plans is key to growing our wealth and saving for retirement because it helps us to beat inflation. But according to insights from the OCBC 2020 Financial Wellness Index, 25 per cent of women don’t know what are the best ways to grow their wealth. On top of that, 38 per cent of women equate investing to gambling. More shockingly, the survey also found that 71 per cent of women don’t seek advice from qualified professionals when they are making investment decisions. 

Only 60% of women have investments

38% of women equate investing to gambling

71% of women don’t seek advice from qualified professionals when making investment decisions

OCBC 2020 Financial Wellness Index

But here’s the good news: the survey also found that when women do their research, have the confidence and sought the advice of experts, their investments actually earn a 0.2 per cent higher rate of return, compared to men. 

And here’s some even better news: you can get started on your investing journey with small, baby steps –  even if you lack the financial know-how (for now!) and your risk appetite is low. 

“You don’t need a lot of money to start investing,” says Vasu Menon, executive director of investment strategy at OCBC Bank. “A regular investment plan where you squirrel away small amounts each month into pre-selected investments is one fuss-free way to start building a portfolio.” 

Tan Siew Lee, Singapore’s head of wealth management at OCBC Bank, echoes the same sentiment. 

“There are monthly investment plans that start at reasonably low amounts that can help accumulate financial assets gradually over time, making investments less daunting and more palatable for people with a tighter budget,” she explains. 

But before you start investing, here are some things you need to do first:

  • Save at least six months of your monthly expenditures, in case of emergency 
    The general rule of thumb is to have six months’ worth of emergency savings in case of an unexpected event, like a job loss or serious illness. If you want to be more prudent, Siew Lee’s advice is to have 12 months’ worth of savings set aside.
  • Ensure that you have adequate insurance coverage 
    Siew Lee cautions that healthcare costs can easily deplete your savings, so it’s important to ensure that you have adequate health, hospitalisation, and critical illness coverage. And don’t worry, you don’t necessarily have to get them all at once if your cash flow doesn’t allow for it. “The key here is to start and grow your coverage with time,” she shares.

  • Save at least 10 per cent of your disposable income 
    While there isn’t a standard for how much of your income you should be investing, both experts recommend saving at least 10 per cent of your disposable income.

  • Be clear about your liquidity needs before you invest surplus funds 
    That includes mortgage payments, insurance payments, school fees, etc. Then, make sure that you have sufficient liquidity buffers in place. “This is so that you don’t have to liquidate your investments prematurely, or at a loss, in order to access liquidity,” says Siew Lee. 

If you fall into the category of investors with a low-risk appetite, take heart. You can still grow your wealth by going for long-term investment plans.  

“It’s not about how much risk you take and how you time the markets, but rather, how much time you spend staying invested in the markets,” says Vasu. 

“The earlier you start, the more time your money will have to grow. That will benefit you in later years and ensure the value of your monies do not erode over time,” he elaborates. 

Ready to kickstart your investment journey? Here are some options that are recommended for investment newbies: 

https://www.herworld.com/gallery/women/money/investing-foolproof-guide-first-investment-ocbc/
The foolproof guide to making your first investment
Exchange Traded Funds (ETFs)
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Exchange traded funds (ETFs) are funds that are listed and traded on the stock exchange. With the OCBC Blue Chip Investment Plan, you can invest in ETFs from as low as $100 a month, which is great for those who are looking to start small. Think of this as a “set and forget” investment strategy – you don’t have to constantly monitor your investments or how your stocks are performing, because this investment plan reduces the risk of market timing with dollar-cost averaging.

Dollar-cost averaging is your best bet if you’re planning to play it slow and steady. Instead of investing a large sum of money at once, you are consistently investing a set amount of money on a regular basis. The advantage of this is that it can potentially lower your average price per counter over time because you are not timing the market.

“Diversify over time by phasing your investments into the markets through a regular investment plan, so that if the markets see a drawdown or sharp volatility, you will have dry powder to buy at lower levels, which reduces your average cost. A regular investment plan allows you to benefit from dollar-cost averaging,” explains Vasu.

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Unit Trusts
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Besides ETFs, novice investors can also consider investing in unit trusts. A unit trust is composed of a pool of monies from a group of investors, managed by a fund manager who then invests it in a variety of financial assets, according to a specific investment strategy or mandate. The great thing about this is that you get access to professional fund managers, who have the experience, skills, and resources to manage the portfolio on your behalf. You’ll also get access to a diversified portfolio without having to invest a huge sum of money in individual stocks or bonds.

You can choose to invest a lump sum (minimum $1,000), or make regular investments of smaller amounts (minimum $100/month) to take advantage of dollar-cost averaging. You can make your purchases with cash, or via the Central Provident Fund (CPF) Investment Scheme or the Supplementary Retirement Scheme (SRS) for selected funds.

“For myself, I started my investment journey by investing my own CPF monies since the funds were just sitting idle in my account, out of sight and out of mind. I took the first step by setting up a CPF investment account and began exploring opportunities to invest,” says Siew Lee.

She adds that one major advantage of having a regular investment plan like the OCBC Blue Chip Investment Plan is that it takes the stress out of the decision-making process.

“The plan runs on autopilot, so you don’t have to actively think about investing your money. It’s something that works in the background and should be left untouched for the long-term. All it requires is a one-time effort to set up,” she explains.

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Robo-investing
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Those who want to invest a bit more actively but lack the time to manage a portfolio can consider robo-investing, which uses algorithms to construct, monitor and review portfolios for investors. One such platform is the OCBC RoboInvest, which Vasu says is an option for new investors due to its convenience and low cost of entry – you only need to make a minimum initial investment of US$100  for selected portfolios. The investment platform charges 0.88 per cent in annual fees for assets under management.

“OCBC’s RoboInvest platform uses a proprietary algorithm that automates investing with guidance and validation from our OCBC wealth experts. Investors have a wide choice of 34 portfolios. Each portfolio is monitored automatically and periodically re-balanced if there are economic and market movements that impact the portfolio,” says Vasu. In other words, the algorithm constantly monitors your portfolio and periodically suggests changes that allow you to capitalise on the movements in the financial markets, without any effort on your part. But ultimately, you’ll have to approve any changes made to your portfolio.

“Investors are alerted to approve the re-balancing, so they don’t need to constantly monitor their investments to optimise their portfolios.”

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Investing made easy
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These investment options are available on OCBC’s internet and mobile banking platforms, which makes investing more accessible for those who are just getting started.

With open banking recently launched in Singapore, you now also have the option to get a consolidated view of all your financial information so you don’t need to manually track where all your savings and investments are. OCBC Bank’s Your Financial OneView dashboard, available on the OCBC Mobile Banking app, lets you pull financial information from seven participating banks and selected government agencies like CPF, IRAS and HDB, all onto one dashboard – so you can make better-informed decisions for financial wellness. A handy tool is the OCBC Life Goals planner, also available on OCBC’s digital banking platforms, which then pulls in all the information and helps you to visualise how much you will need to achieve your financial goals – and what investments you can make to achieve your goals.

Before you go, here are a few more things to consider before you decide on what to invest in, according to our experts:

  • The risks associated with the investments, and how much you can afford to lose 
  • If the volatility of this investment will cause you sleepless nights 
  • If the returns are worth the risk 
  • The time horizon of this investment, and if there’s a lock-up period

 

Join us for a Her World Virtual Rally on how to become more confident in your money decisions! Hear it from our panellists comedian Sharul Channa, founder and CEO of Half The Sky Sabrina Ho, editor Ng Yi Lian, and OCBC Singapore’s head of wealth management, Ms Tan Siew Lee. Sign up here.

For more resources on personal finance, visit OCBC’s Simply Spot On website.

Brought to you by OCBC

  • TAGS:
  • finance
  • investing
  • OCBC
  • OCBC bank singapore
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