Money tips: How to fast track your investment game when you're in your 30s

Picture this: You are in your 30s and worried about your finances. Your mortgage has increased thanks to rising interest rates, your credit card bills are piling up, and your retirement nest egg is nowhere near where you’d hope it’d be. You thought that contributing to your CPF would be enough… but are now regretting not saving more and investing wisely in your 20s.

Sounds familiar? You are not alone. The Her World 2023 What Women Want survey revealed that 63 per cent of women surveyed have debts – predominantly housing loans and credit card bills – to clear currently, while 46 per cent believe they need to cut down on their spending. Furthermore, 41 per cent aim to retire by 60 with a targeted median savings of nearly $890,000. Separately, an OCBC survey conducted in 2022 showed that only 41 per cent of Singaporeans are on track with their investment goals.

However, financial experts say it’s not too late to get started. Whether you’ve put it off because you are not sure how or where to start, or you were busy spending your 20s in YOLO mode, it’s possible to hop on the investment train even in your 30s – albeit with a few caveats.

Build your safety net first

If you don’t already have an emergency fund that’s equivalent to at least three to six months of your salary, you should first focus on ensuring that you have money set aside for a rainy day.

“Once you’ve set aside three to six months of monthly expenses as emergency funds, you can start investing with the idle funds you have in your savings account. If you have dependents or are a gig worker, set aside at least 12 months’ worth of expenses,” says Lorna Tan, head of financial planning literacy at DBS Bank.

It’s also important to ensure that you’re adequately insured before you start investing. Without proper coverage, an accident or a medical emergency could wreak havoc on your finances. “It is critical to review the level of protection cover one would need in order to be financially independent, especially on the death or disability of key income earning family member(s),” says Ashmita Acharya, head of wealth and personal banking at HSBC Singapore. “Protection coverage should be adequate to cover medical costs and long-term care.”

As a rule of thumb, the Life Insurance Association (a not-for-profit Singapore based trade association focused on insurance) recommends getting coverage for about five years, as this is roughly the amount of time the average person needs to recuperate from a critical illness.

Determine your risk profile

Once you’re ready to dive into the world of investing, you’ll realise that there is a dizzying array of investment options out there, as well as a wide variety of tools and platforms to help you invest. But first, it’s crucial that you understand your risk profile.

By knowing how much market volatility or losses you’re able to stomach, you’ll be able to better identify which assets to allocate your money to. One factor in determining your risk profile is the length of your investment horizon – how long you intend to hold a particular asset or portfolio.

“In general, anyone in their 30s would have about 25 to 35 more years of potential income generation, which gives them time to benefit from compound returns,” says Lawrence Tan, content lead at Institute of Financial Literacy.

Given this objectively long horizon, he advises women in their 30s to consider taking on a more growth-oriented portfolio allocation, which entails exposure to more varied equities, fixed income and bonds or similar classes of risk. However, he cautions that this is only if you are able to deal with the inevitable higher risks associated with such allocations.

“[If you have a lower risk profile], there is nothing wrong with a more conservative allocation – into defensive equities (stocks that provide consistent dividends and stable earnings regardless of the state of the overall stock market), well-diversified index linked ETFs (exchange traded funds), as well as government securities,” he adds.

As you build your investment portfolio, Lorna Tan of DBS recommends taking a core-satellite approach. This entails constructing your portfolio with a stable, well-diversified “core” – comprising passive investment instruments like ETFs and unit trusts that track equity indices like the S&P 500 or the Straits Times Index – that is complemented by the “satellite”, which is a combination of pooled investment funds, stocks, and bonds that are able to generate returns that are higher than market averages in the short to medium term.

By diversifying across asset classes and global markets, you are minimising overall trading costs and mitigating the risk of market volatility, which comes with individual stock picking. Another strategy to consider is dollar cost averaging (DCA), which sees you investing a fixed amount of money at regular intervals, regardless of market fluctuations. DCA is a long-term strategy that helps keep emotions out of investing, and reduces the risk of mistiming the market.

“Investing is crucial for everyone, especially for women. Women tend to live longer than men and retire with approximately 25 per cent less savings than them,” says Tanya Rolfe, co-founder of female-focused financial education platform Sophia. “Additionally, women tend to have a longer lifespan and, with the onset of menopause, have a significantly higher risk of health conditions such as cardiovascular disease, osteoporosis and breast cancer. As such, they typically have higher medical expenses but less money, and need to make it last longer.”

Sustain your investment journey

Once you take that first step towards investing, it will become much easier to cultivate the habit of putting your money to work, but it’s still important to review your portfolio whenever you reach a new life stage such as getting married, buying a house or having a child.

When in doubt, always reach out to the experts. Besides speaking to a financial adviser, you can also make use of apps like Seedly or Planner Bee to track your finances. The former also allows you to tap on the collective wisdom of others in the personal finance community.

“Do seek professional advice, especially if you are a novice in investing and financial planning,” Acharya says.

“Having an independent and objective adviser to guide you will help you adopt the best approach. Don’t be afraid to ask questions – get clarity before making decisions. Do approach a few professionals to obtain several opinions before making a decision.”

Investments for beginners

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1. Exchange Traded Funds (ETFS)
A basket of securities and shares that are traded on an exchange, ETFs include the S&P 500, which tracks the stock performance of 500 of the largest companies listed on stock exchanges in the US, as well as the Straits Times Index, which tracks the 30 largest companies on the Singapore Stock Exchange. ETFs offers a low-cost way to access a highly diversified portfolio.

What to know: Both ETFs and mutual funds are similar in that both are professionally managed collections of stocks and/or bonds. As such, both are considered less risky than investing in individual stocks and bonds. Unlike a mutual fund, ETFs are listed and tradable on a stock exchange, so it can provide real-time pricing.

2. Mutual Funds
This refers to a fund where investors' money is pooled together and invested in a diverse portfolio of stocks, bonds and other financial assets. Mutual funds are popular with newbie investors as they are affordable, low-maintenance, and offer high liquidity.

What to know: Mutual funds offer a wide range of securities, including index funds and actively managed funds. The latter typically incur higher investing costs.

3. Singapore Government Securities (SGS)
Backed by the Singapore Government, this is a relatively low-risk investment vehicle that offers interest payments at regular intervals.

What to know: Many investors have flocked to SGS as well as Singapore Savings Bonds and T-bills, as they have been offering decent yields amid volatile markets, since last year. While they can form part of the fixed income allocation of your investment portfolio, do note that the steady returns from these instruments are unlikely to help you stay ahead of high inflation, nor offer compounding benefits.

Consider increasing your CPF contribution

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If you are a Singaporean or Singapore Permanent Resident, you would likely already have been contributing monthly to your CPF, which DBS’ Lorna says is a good first step towards planning for your non-income earning years. “Contributing to our CPF is a good avenue to grow our nest egg, given that we can reap the benefits of compounding over time by leveraging the CPF accounts’ attractive returns of at least 2.5 per cent to 6 per cent per annum,” she says.