Frequently Asked Questions – Investment advice for newbies
As a new investor, it is only natural to have many questions. Knowing which questions to ask is key, and this post serves to help those in search of them.
Why should I invest my money instead of keeping it in the bank?
“Never depend on single income. Make investment to make a second source” – Warren Buffett
Did you know that the banks generally offer interest rates that are well below the inflation rate in Singapore? This will cause your hard earned savings to drop in purchasing power year after year. Thus, if you are able to invest in a portfolio that is within your acceptable risk profile and enable you to gain a return above the bank interest rates or inflation rate, you can grow your savings instead. It is always more efficient if you can have your money working for you.
How do I choose my first financial adviser?
Your first financial adviser often sets the benchmark for subsequent financial advisers to come (unless you stick to your first for good). That is why you need to carefully filter through all of the cold calls, emails and advertisements before choosing your first financial adviser.
Alignment of interests:
- Are they for you or for themselves?
- Are they tied to a fund manager or financial products?
- Too good to be true?
There is no free lunch. Any promises of guaranteed returns or huge yields with tiny risks should be taken with a huge pinch of salt.
How do I start investing? How do I choose my platform?
You have the money, you’ve read up a little bit and now you have the intention to invest. But, how do you literally start investing? Through engaging brokerage firms or by choosing an investment platform. A broker will also operate through an investment platform(s) but offers in-depth knowledge on the pros and cons of each and will advise you accordingly. Thus, it is important to look at the fees, commissions, and the access to different platforms that each broker offers.
Who or what is a broker?
In its most basic form, a broker is a person or firm that helps to match buyers and sellers.
Brokers in Singapore are entities that are regulated by the Monetary Authority of Singapore (MAS). Based off clients’ objectives, time horizon, availability of cash and liquidity, they offer advice along with an array of platform options for clients to invest in. Their goal is to create a win-win situation where they grow their client’s savings while earning a commission, creating wealth for both parties.
There is no “one broker fits all”. Thus it is important to choose a broker that suits your personal style. For example, a trader (one who trades in short term volatility) might want to choose a broker with lower deal execution fees while a buy-and-hold investor might want to choose a broker without any monthly fees, even though deal execution fees may be higher.
It is also paramount that you read the fee structure of your potential broker carefully. This is to avoid getting into messes like hidden fees that will suddenly turn your “too good to be true” rate into a costly trade. Especially for brokers who do not disclose their fee structures early and transparently or have unusual fee structures.
What kind of investments should I be making?
People use the word “investments” too loosely. To establish what investments you should be making, you first need to know what options you have with a sum of money:
- Put it in a Bank
- Buy an Insurance Plan
- Engaging a trading platform
- Engaging a Broker
Each of these are not mutually exclusive and a broker is a special option as brokers are able to provide all the above services at once.
Common Beginner Mistakes
The ‘Quick Fix’
The largest beginner pitfall is the desire to make money at the start. Start small and grow your investment over time. Investing is a risky activity and budding investors should use their first investments to learn as much as they can, instead of trying to achieve a 20% return rate during year one. By acknowledging that you will definitely lose some investments in the beginning, it is all about learning from them. This process will allow you to look at things from multiple angles, thus laying down the foundations for your journey as an investor in the long run.
“Investing should be more like watching the paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas” – Paul Samuelson
But, I researched it!
Of course, many try to do “research” before investing in shares but they don’t know how to do the correct research. This is the next largest pitfall. It is difficult to sieve through all the information and numbers on the internet and reading financial statements was not exactly taught in high school. You can start by educating yourself on a mix of technical analysis and fundamental analysis (look them up!). Although your vision won’t be 20/20, you will definitely be better off than blind.
To learn more about how I may be able to help manage and tailor your financial needs, please contact me:
☎ +65 9763 7746
Deepak Singh is a highly qualified financial advisor with Global Financial Consultants Pte Ltd,who gives unbiased and honest financial advice. He manages the financial portfolios of Singaporeans, Permanent Residents (PR) and expatriates. Deepak Singh is a representative of Global Financial Consultants Pte Ltd – MAS Licence no. SDK30016098
General Information Only: The information here is of a general nature only. It does not take into account your individual financial situation, objectives or needs. Seek advice before making a decision.