From The Straits Times    |

Did you know that women outperform men when it comes to investment returns? According to a 10-year study by international financial consultant firm Fidelity, they make 0.4% more on average than their male counterparts.

Still, some women are hesitant to take that first step: They believe that they lack the financial knowledge to dip their toes in the water. When Her World conducted the What Women Want Financial Literacy survey in 2023, the results showed that more than 50% of respondents stated that their financial knowledge was poor to average.

But as the adage goes, Rome was not built in a day. Taking baby steps can sometimes be all the push we need to help us build our financial knowledge and confidence.

In this series, we speak to financial experts and savvy women on how to grow your first $1,000. For the third in this series, Adrian Vincent, CEO of FWD Singapore, an Asia-based insurance firm, gives us his recommendations.

Can you suggest an investment strategy for the first $1,000?

Before diving into investing, make sure you build a solid financial foundation first. Start by establishing an emergency fund to handle unexpected expenses. At the same time, set aside savings for your financial needs.

Don’t overlook the importance of insurance, which acts as a safety net to protect you and your loved ones from life’s uncertainties. Once these essentials are sorted, you’ll be in a more resilient position to explore investment opportunities with confidence.

When considering your first investment, assess your finances, goals, timeline, and risk appetite. Short-term goals like loans or a new home typically involve immediate funds, while long- term goals like retirement require steady portfolio growth. Your time horizon also determines your risk appetite and asset choices, guiding your investment strategy to match your comfort level and objectives.

This is why it is important to do a financial needs analysis before making your first or any investment. It ensures that your investment strategy aligns with your financial goals, risk appetite, and your overall financial plan. If in doubt, you can seek the advice of a qualified financial planner.

Adrian Vincent

How do I choose between a self-directed approach and using a financial adviser or robo-adviser?

Consider factors such as your comfort level with control, desired guidance, fees, and the level of personalisation needed. Your decision may also depend on your investment knowledge, time availability, and personal preferences.

Choosing a self-directed approach requires actively managing investments, and is best for investors who have the relevant knowledge, experience, and time for hands-on management.

A financial adviser offers professional guidance and comprehensive wealth planning by conducting a financial needs analysis to align recommendations with individual financial goals and risk appetite.

Robo-advisers use automated algorithms for advice and financial management, which is an approach that appeals to those seeking investment with little to no human intervention.

How do I determine my risk tolerance, and why is it important for my investment strategy?

Determining your risk appetite is fundamental in shaping your investment strategy, as investment always comes with the risk of losing the money that you invest. Some factors that are typically considered include:

Financial objectives: Are you saving for retirement, a home, or any other specific goal? Time horizon: When do you plan to utilise the invested funds? Is it a near-future expense or a distant goal?

Affordability and sustainability: What is the amount that you can afford to set aside for your financial objectives? Is it a substantial portion of your assets and income?

Financial situation: Review your current financial standing, including emergency savings, stable income, and existing debts.

Risk appetite: How would you respond if the market dropped in value? How comfortable are you to hold on to your investment until you get a better performance?

Without a clear understanding of your risk appetite, you risk making decisions that either expose you to excessive stress due to high-risk investments, or lead to missed growth opportunities from overly conservative approaches. Striking a balance between risk and return is pivotal.