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 on how to grow your first $1,000. For the first in this series, Jacquelyn Tan, head, Group Personal Financial Services, UOB, gives us her recommendations.
Can you suggest an investment strategy for one’s first $1,000?
For investors who are either young and/or just starting out, we typically recommend building up the core portfolio first. Core investment solutions tend to be less reliant on market conditions, and hence have lower risk. They are typically designed to maintain capital and to be held through different market cycles, with some providing regular income, thereby supporting investors to achieve their long-term goals.
Core investments should also be diversified across asset classes, sectors and regions. Some examples of investments suitable to be included in the core portfolio include index funds or exchange- traded bond or equities funds, government securities or treasury bills, or equity investments in global blue-chip/ large cap companies, particularly those in the defensive sectors (eg healthcare).
Should my investment goals be short-term or long-term, and how does that impact my investment choices?
Investment goals can be classified into retirement, education and wealth accumulation goals. Retirement and education goals tend to be longer term. According to statistics platform Statista, women in Singapore have an average lifespan of 85.9 years, while men are at an average of 81.1 years. Generally, women are encouraged to plan for a longer investment period, with investment assets that can help them build a steady and predictable stream of income to last through their retirement period.
Similarly, investing for their child’s education is a long-term goal. These investment assets tend to have lower volatility and correlation with the general market, and are diversified in nature. Having taken care of their long-term goals, wealth accumulation goals can then be fulfilled by shorter term investments as they look for market opportunities for capital upside returns. Tactical investments are higher risk in nature, and focus on capturing targeted, short- term opportunities.
What fees should I be aware of when investing, and how do they impact my overall returns?
Generally, fees will be incurred for all investment products. The most common one is a subscription fee that is applicable to most investment products, and secondary fees such as annual management fees specific to funds investment.
To illustrate, for funds investment, the investor will typically incur a one-off fee directly, applied at the onset of the investment, known as the initial subscription fee and/or at the end when the investment is sold off, known as the redemption fee.
There are also secondary fees indirectly borne by the investor, such as those payable by the sub fund, which are reflected in the daily value of the investment. These on-going fees can be in the form of an annual management fee charged by the portfolio managers, annual trustee’s fee, performance fee or platform fee charged by the investing vehicle or platform.
Both types of fees will lower the investor’s portfolio returns, especially the on-going fees payable by the sub fund, which may be neglected and may have a material impact on returns over the longer period.